September 12, 2024/CSL Research

GTCO’s H1 2024 audited numbers showed a strong 173.5%y/y growth in Interest Income to N617.8bn driven by growth in both average volume of earning assets and average yield. Q/q (Q2 2024 compared with Q1 2024) Interest Income was also up 19.4%. Net Loans and advances to Customers grew 25.5% in H1 2024 relative to FY 2023 (inclusive of the impact of devaluation of foreign currency loans). Interest Expense also grew strongly, up 160.6% y/y to N126.4bn. Customer Deposits grew moderately, up 38.4% (inclusive of the impact of devaluation) in H1 2024 compared with FY 2023. Overall, Net Interest Income grew 177.0% y/y to N491.5bn compared with N177.5bn in H1 2023.

Net Fee and Commission Income grew strongly up 96.1% y/y to N101.1bn but was down 6.6% q/q (Q2 2024 compared with Q1 2024). Main drivers of the y/y growth were strong growth in credit related fees, account maintenance charges, E-business income, commission on foreign exchange deals, Income from financial guarantee contracts issued account services, maintenance and ancillary banking charges, shared service fee and transfer related charges.

H1 2O24

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Source: Company’s Financials, CSL Research

Other Income (Net gains on financial instruments held at FVTPL and Other Income) grew significantly, up 70.2% y/y to N660.7bn. The significant y/y growth was mainly driven by strong growth in unrealised fair value gain on financial instruments of N493.0bn reported in H1 2024 compared with N253.6bn booked in H1 2023 and unrealised gain on forward transactions of N130.2bn in H1 2024 compared with only N16.0bn. The group reported unrealized FX revaluation loss of N3.9bn in H1 2024 compared with a gain of N103.8bn in H1 2023.

OPEX grew significantly, up 60.7% y/y to N201.8bn. Q/q, OPEX was up 3.2%. The significantly lower y/y growth in Opex, compared with a 103.0%y/y growth in Total Operating Income led to a drop in the bank’s Cost to Income Ratio ex-provisions (CIR ex-provisions) to 16.1% in H1 2024 compared with 20.3% in H1 2023.

Total Impairment Charge (Loan impairment charges and net impairment charges on other financial assets) was down to N47.8bn in H1 2024 compared with N164.3bn in H1 2023. The group reported Loan Impairment Charge of N47.4bn bringing H1 2024 annualised cost of risk (COR) to 1.6% compared with 4.5% for FY 2023. IFRS 9 Stage 3 Loans closed at 4.3% in June 2024 from 4.2% in December 2023.

Management at the last conference call stated that GTCO’s balance sheet has been derisked with significant write offs in 2023 and noted that the bank is coming into 2024 with a clean balance sheet and expectations of write backs.

Overall, PBT grew significantly, up 206.6% y/y to N1,003.8bn while Net Profit was up 222.9% y/y to N905.6bn in H1 2024 bringing H1 2024 annualised post -tax ROAE to 93.4% compared with 44.8% for FY 2023. Ex all fair value gains, ROAE comes to 29.1%.

The group reported Capital Adequacy Ratio (CAR) of 21.0% for H1 2024.

The management proposed an interim dividend of N1.00/s.

We have a Buy recommendation on the stock and a target price of N65.20/s. Current Price N45.45/s.

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

​​​CSL GTCO H1 2024 Quick Take.pdf​​​​​