May 2, 2023/CSL Research
GTCO’s Q1 2023 unaudited numbers showed a 47.3%y/y growth in Interest Income to N104.1bn driven by growth in Interest Income on Net Loans and Investment Securities. Net Loans and advances to Customers declined marginally, down 1.5% in Q1 2023 relative to December 2022. The bank has been very reluctant to increase risk assets amidst the negative headwinds. On the other hand, Interest Expense also grew strongly, up 63.2% y/y to N21.9bn. Customer Deposits grew moderately, up 9.5% in March 2023 compared with December 2022. Overall, Net Interest Income grew 43.6% y/y to N82.2bn. The group reported cost of funds of 1.24% and yield on Interest Earning Assets of 8.53% for December 2022.
Net Fee and Commission Income grew strongly, up 37.5% y/y. All Fee and Commission lines showed growth y/y but major drivers were a 34.2% y/y growth in credit related fees, a 41.2% y/y growth in corporate finance fees, a 61.8% y/y growth in E-business Income and a 33.5% in Account services, maintenance and anciliary banking charges.
| Q1 2023 (Nm) |
Source: Company’s Financials, CSL Research.
Other Income (Net gains on financial instruments held at FVTPL and Other Income) declined 12.3% y/y. The y/y decline was mainly due to a 31.2% y/y decline in Net foreign exchange realized trading gain.
OPEX grew moderately, up 16.8% y/y. The lower y/y growth in Opex, compared with a 29.1%y/y growth in total Operating Income led to an improvement in the bank’s cost to income ratio ex-provisions to 42.0% in Q1 2023 compared with 46.4% in Q1 2022.
Total Impairment Charge of N3.4bn was up 184.8% y/y, bringing Q1 2023 annualised cost of risk (COR) to 0.7% in line with our 2023e forecast.
Overall, PBT grew significantly, up 36.5% y/y while Net Profit was up 34.6% y/y to N58.2bn for Q1 2023, bringing Q1 2023 annualised ROAE to 24.4%. The new non-banking subsidiaries Habari Pay Ltd, Asset Management and the Pension Fund contributed a total of N1.2bn to PBT (1.6%).
We have a Buy recommendation on the stock with a target price of N39.29/s Current Price N24.85/s.
Source: Company data, CSL Research
