Non-interest income growth settled at +12.91% y/y, which is running ahead of our FY-19 estimate of 10.25% y/y. This strong growth was supported by fees and commission income growth of 30.63% y/y. Also, as expected, FX trading income has been weak in the year and is expected to remain so.

Interestingly, operating expenses growth was muted, settling higher at 0.43% y/y. This, is despite the moderate increase in regulatory costs (AMCON levy: +9.65% y/y), as the bank managed other ancillary costs to maintain its cost-to-income ratio at its industry-best level of 37.63% (H1-18: 38.82%).

Consequent on the income recorded, and the growth in expenses, the bank recorded growth in PBT of 5.61% y/y, while PAT settled 3.72% higher y/y following an 18.53% y/y increase in income tax expense. The current run-rate for PAT implies a 6.66% y/y expansion, relative to our estimate of 3.70% y/y.

Finally, while a comprehensive document regarding macro-prudential ratios is yet to be provided, we assessed the bank’s numbers in the light of the new minimum LDR ratio of 60.0%. Given the proportion of Retail and SME loans in the bank’s assets of 18.0% and 4.5% (previously 24.3% and 5.9%), the LDR for the bank settled at 61.92% for H1-19, which means that the bank is not in breach.

Comment: GUARANTY’s result is strong, and should lead to the bank posting equally strong FY-19. We are encouraged that the bank will not be below the statutory limit for LDR at the deadline in September, which would mean that the bank would not have to disrupt its risk management framework to drive business growth.