Culled—Proshare

April 18, 2018/FBNQuest Research  

Event: GT Bank reports Q1 2018 results
Implications: Slight upward revisions to consensus PBT forecasts likely
Positives: PBT and PAT grew by 4% y/y and 8% y/y, thanks to a 52% y/y reduction in loan loss provisions and a 41% y/y growth in non-interest income
Negatives: Funding income declined by 10% y/y

This afternoon GT Bank (GTB) published its Q1 2018 results which showed that PBT grew by 4% y/y to N52.6bn. The single-digit y/y growth was driven by a -52% y/y reduction in loan loss provisions and a 41% y/y growth in non-interest income. The growth in non-interest income was largely underpinned by fx revaluation gains of N5.5bn (vs. –N306.4m Q1 2017). In contrast, funding income declined by -10% y/y.

Further down the P&L, PAT grew by 8% y/y to N44.4bn, thanks to a lower effective tax rate of 15.1% vs. 17.7% Q1 2017. Sequentially, PBT grew 5% q/q; again, the reduction in loan impairment charges was the major driver. However, PAT fell by 13% q/q because of a 50% q/q spike in taxation.  Compared with our forecasts, PBT and PAT beat by 6% and 8% respectively, because non-interest income surprised positively.

In terms of balance sheet trends, GTB’s loan book declined by around 7% q/q, while deposits grew by 7% q/q. On its Q4 conference call, management had guided to loan growth of around 10% y/y, underpinned by improvements in macro-economic fundamentals. As such, we had expected to see some level of loan growth in Q1 2018. Management had also guided to subdued PBT growth of around 2.4% y/y for 2018E. The Q1 2018 results suggests that it may be tracking slightly ahead of guidance and imply a 2018E ROAE of >25%.

GTB’s Q1 2018 results are tracking slightly ahead of consensus 2018E PBT forecast of N203bn. Consequently, we expect to see modest upward revisions to consensus 2018E PBT forecasts and a positive reaction from the market.

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

GT Bank Q1 2018 results: actual vs. FBNQuest Capital Research estimates (N millions)

Source: NSE; FBNQuest Capital Estimates