May 3, 2024/Cordros Report
Guaranty Trust Holding Company Plc (GTCO) released its Q1-24 unaudited financial statements this afternoon, reporting a whopping 696.1% y/y rise in EPS to NGN16.24 for the period under review (vs Q1-23: NGN2.04). The impressive growth in the Holdco’s earnings was driven primarily by the fair value gain on the group’s financial instruments (NGN331.55 billion | Q1-23: loss of NGN99.00 million) coupled with expansion in its funded income line (+170.6% y/y).
Interest income advanced by 170.6% y/y to NGN281.65 billion, boosted by higher income from loans and advances to customers (+91.0% y/y), investment securities (+307.5% y/y) and cash and balances with banks (+265.9% y/y). We note that the Holdco’s earning asset increased by 104.3% YTD to NGN10.18 trillion as the high yielding environment also supported growth in core income.
Sequentially, interest expense rose by 147.9% y/y to NGN54.35 billion, primarily driven by the higher interest paid on customer deposits (+141.0% y/y) as the group’s deposits surged to NGN9.20 trillion (YTD: +87.3%). We however note that the Holdco recorded a slight deterioration of its funding mix (CASA as at Q1-24: 88.3% vs FY-23: 88.6%). Accordingly, the Holdco recorded a 176.7% y/y increase in net interest income. Following higher charges for loan impairments (+291.8% y/y), the net Interest income (ex-LLE) settled at NGN213.81 billion, translating to a 171.7% y/y growth.
GTCO witnessed a remarkable 666.4% y/y increase in its non-interest income to NGN394.86 billion, majorly driven by the NGN331.55 billion fair value gain recorded for the Holdco’s financial instruments (Q1-23: loss of NGN99.00 million) as income from net fees and commission (+74.5% y/y) and FX trading (+48.9% y/y) also increased. Elsewhere, we highlight that the group recorded a higher FX revaluation loss of NGN12.67 billion (+145.1x y/y) in Q1-24.
Operating expenses (OPEX) grew by 76.9% y/y to NGN99.33 billion following the higher personnel expenses (+114.4% y/y) and regulatory fees – AMCON levy (+33.7% y/y) and deposit insurance premium (+48.5% y/y). Given that operating income (367.4% y/y) grew faster than OPEX, the group’s operational efficiency improved significantly as its cost-to-income ratio (ex-LLE) settled at 16.3% (Q1-23: 43.1%).
As expected, GTCO’s profitability was stronger, with profit-before-tax settling 587.5% higher year-on-year to NGN509.35 billion. After accounting for a higher income tax charge of NGN52.21 billion (+227.9% y/y), PAT settled at NGN457.13 billion (+685.9% y/y).
Comment: We like the stellar earnings performance put out by GTCO in Q1-24 as the income from its funded and non-funded lines were robust. Going into 2024E, we are positive that the Holdco’s interest income will remain buoyant given the high yielding environment. Our estimates are under review.
Cordros Research
