April 17, 2023/CSL Research
GTCO’s FY 2022 audited numbers showed a 21.9%y/y growth in Interest Income to N325.4bn driven by growth in Interest Income on Net Loans and Investment Securities. Q/q, (Q4 2022 compared with Q3 2022), Interest Income was up 8.9%. Net Loans and advances to Customers were up only 4.6% y/y. The bank has been very reluctant to increase risk assets amidst the negative headwinds. On the other hand, Interest Expense was up 42.8% y/y to N66.1bn. Q/q, Interest Expense grew 41.6%. Customer Deposits grew moderately, up 11.8% in December 2022 compared with December 2021. Overall, Net Interest Income grew 17.5% y/y, 5.6% below our forecast.
Net Fee and Commission Income grew moderately, up 18.0% y/y, slightly lower than our forecast. Q/q, (Q4 2022 compared with Q3 2022), Net Fee and Commission was up 3.3%. The major drivers of the y/y growth were a 16.0% y/y increase in Account Maintenance Charges, a 96.2% y/y rise in corporate finance fees, a 41.9% y/y increase in account services, maintenance, and ancillary banking charges.
| FY 2022 (Nm) |
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Source: Company’s Financials, CSL Research
Other Income (Net gains on financial instruments held at FVTPL and Other Income) was up 15.4% y/y but grew significantly in Q4, up 202.9% in Q4 2022 compared with Q3 2022. The group reported revaluation gains of N64.2bn in FY 2022 compared with N45.0bn reported in FY 2021. Significant growth in Net foreign exchange trading gains in FY 2022 (up 43.3%) was also supportive.
OPEX grew moderately, up 22.0% y/y (6.0% above our forecast) but grew significantly in Q4 compared to Q3 2022, up 46.2% q/q. The slightly higher y/y growth in Opex, compared with a 17.0%y/y growth in total Operating Income led to a slight deterioration in the bank’s cost to income ratio ex-provisions to 43.0% in FY 2022 compared with 41.3% in FY 2021.
Total Impairment Charge of N47.9bn (including N35.6bn relating to the group’s exposure to securities issued by the Ghanaian government) was up 415.8% y/y, bringing FY 2022 cost of risk (COR) to 2.5%. As reported by the bank, GTCO was exposed to Ghana’s sovereign debt restructuring, as a result of its investment in GTBank Ghana, a direct subsidiary of GTBank Nigeria. As a means of deploying US dollar liquidity, the group also had exposures to Eurobonds issued by the Government of Ghana, through the following entities: GTBank Nigeria Limited, GTBank Sierra Leone, GTBank Liberia, and GTBank Rwanda. NPL ratio improved to 5.2% in December 2022 from 6.0% in December 2021.
Overall, PBT declined slightly, down 3.3% y/y while Net Profit declined 3.2y/y to N169.2bn for FY 2022, bringing FY 2022 ROAE to 18.6% compared with 20.6% for FY 2021. Q/q, Pre-tax profit declined significantly, down 33.2% in Q3 compared with Q3.
The group’s management proposed a final dividend of N2.80/s. This, coupled with an interim dividend of N0.30/s makes total dividend of N3.10/s, implying a dividend yield of 12.7% based on current price of N24.40/s.
The group reported Capital Adequacy Ratio (CAR) of 24.1%.
We have a Buy recommendation on the stock with a target price of N39.29/s Current Price N24.40/s.
