April 27, 2021/InvestmentOne Report
· Net interest income of N52.44billion, down 17.98%q/q , 18.43%y/y
· Non-interest income of 45.86billion, down 13.09%q/q, up 27.99%y/y.
· Profit before tax of N53.68billion, down 24.12%q/q, 7.77% y/y.
· Profit after tax of N45.55billion, down 23.01%y/y, 9.03%y/y.
.
Weak q/q Performance
Recently, Guaranty Trust bank released its Q1 2021 result which showed a 24.12%q/q decline in PBT. This was driven by a 17.98%q/q fall in Net Interest Income (NII), 13.09%q/q decrease in Non-interest Income and 13.81% increase in OPEX, which offset the 80.27%q/q decline in loan impairment. The decline in NII was due to weak Net interest Margin (7.20% in Q1 2021 vs 9.26% in FY 2020 and decline in the bank’s loan book (-1.40%YTD). We believe low interest rates on bills in H2 2020 may still be dragging the bank’s asset yields lower as bulk of its treasury bills holding as at December 2020 were invested at significantly low rate. The decline in Non-interest income was due the high base impact of FX revaluation gain recognized in Q4 2020 (N4.59billion in Q1 2021 vs N35.01billion in Q4 2020). OPEX rose due to AMCON expenses of N9.44billion recognized in Q1 2021(Nil in Q4 2020). We believe the improvement in macroeconomic condition could have supported fall in loan impairment.
Weak NIM Offsets the impact of the Jump in Non-Interest Income
On a y/y basis, while Net Interest Income was down by 18.43%, Non-interest income increased by 27.99%. This increase in Non-interest Income was driven by a jump in the bank’s recoverable to N12.60billion in Q1 2021 from N4.69billion in Q4 2020 while the decline in NII was due to fall in asset yield. OPEX was flat while loan impairment rose by 52.05% as macroeconomic conditions remain below COVID-19 level. Resultantly, PBT fell by 7.77%y/y to N53.68billion in Q1 2021.
Outlook
As most banks have already applied for loan restructuring with the CBN, we expect the effect of the current pandemic on asset quality to be managed through this process. In the same vein, with the gradual improvement in economic activities, we expect overall performance of assets to improve.
With the recent increase in interest rates in the fixed income market, we expect the bank’s Net Interest Margin to improve in the near term. In the same vein, with the bank’s plan on Hold Co. structure, we expect this to be positive for its shareholders in the long run as the bank diversifies its business into non-bank services and increases its exposure to other African countries.
In the same vein, according to the management, the bank expects a potential FX earning from its swap (Swap value of US$613million as at December 2020) revaluation which is currently carried at around N364/USD. Overall, we believe Guaranty Trust bank is one of the quality names in the sector which should thrive as the bank remains resilient (efficiency and strong capital base) in the face of weak macroeconomic environment.
GUARANTY TRUST BANK PLC Q1 2021 (YE: DEC) (N millions)
| |||
Q1 2021
| Q/Q
| Y/Y
| |
Interest Income
| 60,309
| -16.83%
| -21.71%
|
Interest Expense
| -7,874
| -8.21%
| -38.27%
|
Net Interest Income
| 52,435
| -17.98%
| -18.43%
|
Non-interest income
| 45,857
| -13.09%
| 27.99%
|
Profit before provisions
| 95,326
| -17.20%
| -3.91%
|
Loan Impairment charges
| -1,860
| -80.27%
| 52.05%
|
Total Opex
| -39,783
| 13.81%
| 0.02%
|
PBT
| 53,683
| -24.12%
| -7.77%
|
Tax
| -8,137
| -29.77%
| 0.00%
|
Tax rate
| 15.16%
| -122bps
| 118bps
|
PAT
| 45,546
| -23.01%
| -9.03%
|
Source: Company financials, Investment One Financial Services Research
Q1 2021 BANKS COMPARISON SHEET
| ||||
NGN billion (unless stated otherwise)
|
| UBA
| GTB
| |
Key Income Statement Figures
| Gross Earnings
| 155.40
| 106.17
| |
Net Interest Income
| 74.38
| 54.43
| ||
Non-interest Income
| 32.27
| 45.86
| ||
Total Expenses
| 64.45
| 39.78
| ||
Loan Impairment Charges
| 2.03
| 1.86
| ||
Profit Before Tax
| 40.58
| 45.55
| ||
Y/Y PBT Growth
|
| 24.00%
| -9.03%
| |
Dividend (Kobo per share)
| Nil
| nil
| ||
EPS (kobo per share)
| 1.04
| 1.60
| ||
Key Balance Sheet Figures
| Total Assets
| 7,892
| 4,993
| |
Total Liabilities
| 7,130
| 4,155
| ||
Total Equity
| 762
| 838
| ||
Key Ratios
| Net Interest Margin
| 4.87%
| 7.20%
| |
Cost of Fund
| 2.01%
| 0.83%
| ||
Cost to Income
| 60.44%
| 42.56%
| ||
NPL ratio
| NA
| NA
| ||
Liquidity (bank level)
| NA
| NA
| ||
Cost of Risk
| 0.29%
| 0.45%
| ||
Capital adequacy ratio (bank level)
| NA
| NA
| ||
ROAE
| 20.53%
| 22.06%
| ||
ROA
| 1.96%
| 3.67%
| ||
Source: Company financials, Investment One Financial Services Research
