September 4, 2023/CSL Research

GTCO’s H1 2023 audited numbers showed a 53.5%y/y growth in Interest Income to N225.95bn driven by growth in Interest Income on Net Loans and Investment Securities. Net Loans and advances to Customers was up 22.8% in H1 2023 relative to December 2022 (inclusive of the impact of devaluation of foreign currency loans). The bank has been very reluctant to increase risk assets amidst the negative headwinds. On the other hand, Interest Expense also grew strongly, up 84.0% y/y to N48.5bn. Customer Deposits grew moderately, up 39.1% (inclusive of the impact of devaluation) in June 2023 compared with December 2022. Overall, Net Interest Income grew 46.8% y/y to N177.5bn.

Net Fee and Commission Income grew marginally y/y, up 8.8% and declined in Q2 relative to Q1 2023, down 27.8%. The q/q decline was due to steep declines in credit related fees (down to N127.5m in Q2 2023 from N2.8bn in Q1) and corporate finance fees (down to N912.9m in Q2 2023 from N3.9bn in Q1 2023).

H1 2O23

Source: Company’s Financials, CSL Research.

Other Income (Net gains on financial instruments held at FVTPL and Other Income) grew significantly, up 921.4% y/y with almost all the growth in Q2 2023. The significant growth was due to strong revaluation gains of N357.5bn booked in H1 2023 compared with only N1.9bn booked in H1 2022.

OPEX grew significantly, up 26.8% y/y. The lower y/y growth in Opex, compared with a 199.3%y/y growth in total Operating Income led to a sharp drop in the bank’s cost to income ratio ex-provisions (CIR ex-provisions) to 20.3% in H1 2023 compared with 48.2% in H1 2022. Excluding revaluation gains, CIR ex provisions comes t9 48.3% in H1 2023.

Loan Impairment Charge grew significantly to N82.96bn from N3.5bn in H1 2022, bringing H1 2023 annualised cost of risk (COR) to 3.7% compared with 0.6% for December 2022. IFRS 9 Stage 3 Loans improved to 4.6% in June 2023 from 5.2% December 2022. This, management attributed to worsening macros which caused a significant increase in ECL variables. The group also reported Net impairment charge/reversal of N81.3bn which may be related to Ghana Impairments.

Overall, PBT grew significantly, up 217.1% y/y while Net Profit was up 261.6% y/y to N280.5bn for H1 2023 from N77.6bn bringing H1 2023 annualised ROAE to 52.6%.

Management proposed an interim dividend of N0.50/s compared with N0.30/s proposed in the same period last year.

The group reports full Impact Capital Adequacy Ratio (CAR) of 24.7%.

We have a Buy recommendation on the stock with a target price of N39.29/s Current Price N/38.00/s. Our estimates are under review.

Kindly click on the below link to download the full report.

​​​​​​​​​CSL GTCO H1 2023 Quick Take.pdf​