April 9, 2024/CSL Research

GTCO’s FY 2023 audited numbers showed a 69.3%y/y growth in Interest Income to N550.8bn driven by growth in both average volume of earning assets and average yield. Net Loans and advances to Customers grew 31.5% in FY 2023 relative to FY 2022 (inclusive of the impact of devaluation of foreign currency loans). The bank has been very reluctant to increase risk assets significantly amidst the negative macroeconomic headwinds. Interest Expense also grew strongly, up 72.6% y/y to N114.1bn. Customer Deposits grew moderately, up 65.2% y/y (inclusive of the impact of devaluation) in 2023 compared with FY 2022. Overall, Net Interest Income grew 68.4% y/y to N436.7bn, 10.8% ahead of our forecast and Net Interest Margin (NIM) expanded to 7.9% compared with 6.7% for FY 2022.

Net Fee and Commission Income grew strongly up 41.3% y/y to N109.4bn largely in line with our forecast. Main drivers of the y/y growth were strong growth in credit related fees, account maintenance charges, Commission on foreign exchange deals, E-Business Income, and transfer related charges.

FY 2O23

Source: Company’s Financials, CSL Research

Other Income (Net gains on financial instruments held at FVTPL and Other Income) grew significantly, up 315.1% y/y. The significant y/y growth was due to strong revaluation gains of N441.8bn reported in FY 2023 compared with N57.9bn booked in FY 2022. Net trading gains also grew moderately.

OPEX grew significantly, up 26.5% y/y to N250.4bn, ahead of our forecast by 3.8%. The lower y/y growth in Opex, compared with a 129.9%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 23.7% y/y in FY 2023 compared with 43.0% in FY 2022. Excluding revaluation gains, CIR ex provisions comes to 40.7% in FY 2023.

Total Impairment Charge (Loan impairment charges and net impairment charges on other financial assets) grew significantly to N197.9bn from N47.9bn in FY 2022. The group reported Loan Impairment Charge of N102.95bn bringing FY 2023 cost of risk (COR) to 4.5% compared with 0.6% for December 2022. GTCO also reported Net Impairment Charge on other financial assets of N94.99bn. NPL ratio was down to 4.2% in FY 2023 compared with 5.2% in FY 2022.

Overall, PBT grew significantly, up 184.5% y/y to N609.3bn in line with our forecast while Net Profit was up 219.0% y/y to N539.7bn for FY 2023 compared with N169.2bn bringing FY 2023 ROAE to 44.8% compared with 18.6% for FY 2022 and our FY 2023 ROAE estimate of 43.0%.

The management announced a final dividend of N2.70/s (Interim N0.50/s) bringing total dividend for FY 2023 to N3.20/s and implying a dividend yield of 6.96% based on current price of N46.0/s.

The contribution from Non-Banking Subsidiaries (HabariPay, Guaranty Trust Fund Managers, and Guaranty Trust Pension Managers) decreased to 0.90% from 0.95% during the same period.

The group reported Capital Adequacy Ratio (CAR) of 21.9% for FY 2023 compared with 24.1% for FY 2022.

We have a Buy recommendation on the stock and a target price of N65.20/s. Current Price N46.0/s.

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

​CSL GTCO FY 2023 Quick Take.pdf​​​