Culled—Proshare

October 18, 2017/FBNQuest Research

Event: GT Bank reports Q3 2017 results

Implications: On track to beat consensus full year PBT forecast of N193bn

Positives: Marked y/y declines in opex and provisions

Negatives: Weaker-than-expected non-interest income

This afternoon GT Bank (GTB) published its Q3 2017 results. Although the bank’s results showed that PBT and PAT declined y/y, relative to our estimates, PBT and PAT beat by 7% and 15% respectively, thanks to positive surprises in opex and loan loss provisions. On a y/y basis, PBT and PAT declined by -6% y/y and -10% y/y to N48.9bn and N43.8bn respectively.

The y/y decline in earnings was driven by a 73% y/y reduction in non-interest income due to negative base effects in the prior year (GT Bank’s 9M 2016 earnings were boosted by fx revaluation gains of N93.6bn vs. N11.7bn 9M 2017). Funding income grew by 12% y/y.

However, the reduction in non-interest income proved significant and was the major driver behind the 27% y/y decline in pre-provision profits. Although opex and loan loss provisions declined by 20% y/y and 94% y/y respectively, partially offsetting the reduction in non-interest income, PBT still fell by -6% y/y.

Further down the P&L, PAT declined even more, by -10% y/y, because of a 66% y/y decline in other comprehensive income (OCI). Sequentially, PBT and PAT showed single digit percentage changes relative to Q2. Again non-interest income which was down by  53% q/q underpinned the sequential decline in earnings.

Despite the y/y decline in earnings, we expect the market to focus on the broad positives, particularly the y/y decreases in opex and loan loss provisions. Notwithstanding, the weakness in non-interest income and the q/q decline in funding income will concern investors.

When annualised, GT Bank’s 9M 2017 PAT implies a respectable ROAE of around 32%; this is among the highest in our universe of bank stocks.

Although the bank’s shares have gained 65% ytd (vs. a 36% ytd return on the NSE ASI), we expect a slight positive reaction from the market.

Our estimates are under review. We rate GT Bank shares Neutral.

GT Bank Q3 2017 results: actual vs. FBNQuest Research estimates (N millions)