May 2, 2023/Cordros Report
Guaranty Trust Holding Company Plc (GTCO) released its Q1-23 unaudited financial statements last Friday, reporting a 35.1% y/y rise in EPS for the period under review (Q1-23: NGN2.04 vs Q1-22: NGN1.51). The impressive growth in the Holdco’s earnings was driven by the expansion across its funded (+47.3% y/y) and non-funded (+11.1% y/y) income lines.
Interest income advanced by 47.3% y/y to NGN104.08 billion, boosted by all contributory lines. Specifically, the Holdco generated higher income from loans and advances to customers (+25.0% y/y to NGN63.59 billion), investment securities (+49.3% y/y to NGN27.70 billion), cash and balances with banks (+962.4% y/y to NGN12.77 billion), and loans and advances to banks (+264.2% y/y to NGN2.00 million).
The Holdco’s interest expense increased by 63.2% y/y to NGN21.93 billion, primarily driven by the higher fees expensed on customer deposits (+57.3% y/y to NGN19.94 billion). Likewise, costs of borrowings (+60.6% y/y to NGN1.03 billion) and financial institutions deposits (+794.7% y/y to NGN85.00 million) came in higher in the period under review. Despite this expense expansion, the Holdco recorded an improvement in its funding mix (CASA as at Q1-23: 89.5% vs FY-22: 87.1%). Accordingly, the Holdco recorded a 43.6% y/y increase in net interest income. Following higher charges for loan impairments (+184.8% y/y), the net Interest income (ex-LLE) settled at NGN78.71 billion, translating to a 40.6% y/y growth.
The Holdco reported an 11.1% y/y increase in its non-interest income to NGN51.52 billion, majorly driven by the higher income from net fees and commission (+59.6% y/y to NGN29.94 billion), which offset the lower gains from FX trading (-31.2% y/y to NGN9.07 billion) and investment securities (-26.0% y/y to NGN1.55 billion).
Operating expenses (Opex) increased by 16.8% y/y to NGN56.14 billion following the higher expenses incurred on regulatory fees – AMCON levy (+17.8% y/y to NGN13.72 billion), deposit insurance premium (+15.9% y/y to NGN4.22 billion) – and personnel expenses (+5.8% y/y to NGN10.39 billion). Given that operating income (27.2% y/y) grew faster than Opex, the group’s operational efficiency improved as its cost-to-income ratio (ex-LLE) settled at 43.1% (Q1-22: 47.0%).
Overall, GTCO’s profitability was stronger, with profit-before-tax settling 36.5% higher year-on-year to NGN74.09 billion.
Comment: GTCO’s Q1-23 financial performance was strong and in line with our expectations. Particularly, we like the strong growth recorded in the group’s core income during the period. Going into 2023E, we are positive that the elevated yield environment and the continuous cost management will help support the group’s earnings. Our estimates are under review.
