September 12, 2024/Cordros Report
Guaranty Trust Holding Company Plc (GTCO) published their H1-24 financials at the close of business yesterday (11 September), revealing a significant growth (+223.1% y/y) in EPS to NGN32.12 (vs NGN9.94 in H1-23). The sturdy growth in earnings was supported by the increases across the group’s funded (+173.5% y/y) and non-funded (+112.5% y/y) income lines. The board declared an interim dividend of NGN1.00/s (H1-23: NGN0.50/s), which equates to a dividend yield of 2.2% based on the last closing price of NGN45.45/s (11 September).
The group reported a 173.5% y/y increase in interest income to NGN617.89 billion, supported by increases across major contributory lines. Specifically, GTCO recorded higher income from investment securities (+296.0% y/y to NGN266.66 billion), loans to customers (+86.6% y/y to NGN242.30 billion), and cash and balances with banks (+352.4% to NGN105.92 billion). We attribute the higher interest income to the combined impact of the elevated interest rates and the increase in key earning assets – cash & cash equivalents (+93.4% YTD to NGN4.47 trillion), investments securities (+56.7% YTD to NGN3.87 trillion) and loans & advances to customers (+25.5% YTD to NGN3.11 trillion) – during the review period.
Interest expenses inched higher by 160.6% y/y to NGN126.38 billion, triggered majorly by higher costs on deposits from customers (+134.4% y/y) following a deterioration in the group’s CASA mix (86.7% | 2023FY: 88.6%) in H1-24. Also, GTCO incurred higher costs on borrowings (+431.6% y/y) and deposits from financial institutions (+412.1% y/y). Notwithstanding, net interest income ex-LLE grew by 177.0% y/y to NGN491.51 billion supported by the faster growth in interest income than expenses amid lower loan impairment charges (-42.9% y/y to NGN47.4 billion).
As expected, non-interest income (NII) grew by 112.5% y/y to NGN761.81 billion, supported by fair value gains on financial instruments (+94.4% y/y to NGN493.02 billion), derivative gains (+712.1% to NGN130.21 billion), and higher net fees and commission income (+96.1% y/y to NGN101.07 billion). The preceding offset the FX revaluation loss of NGN3.92 billion recorded.
Further down, operating expenses increased by 61.0% y/y to NGN202.15 billion, as the group incurred higher costs on technological expenses (+115.1% y/y), personnel expenses (+99.6% y/y), and regulatory expenses – AMCON (+33.6% y/y) & NDIC (+48.3% y/y) during the review period. Eventually, owing to the stellar growth in operating income (+166.2% y/y) to OPEX, the Holdco’s operational efficiency improved as its cost-to-income ratio (ex-LLE) declined to 16.8% (H1-23: 27.7%).
Profitability was robust as profit before tax grew by 206.6% y/y to NGN1.00 trillion. Likewise, the PAT grew by 222.9% y/y to NGN905.57 billion, despite the 109.3% y/y increase in tax expense.
Comment: GTCO’s numbers were impressive as the group continues to retain its position as the most efficient lender in Nigeria. We like that despite the challenging macro space, the HoldCo recorded lower impairment charges on loans (-42.9% y/y) and financial assets (-99.6% y/y). Over the rest of the year, we believe the group will maintain positive momentum, particularly as the higher interest rates and revaluation gains remain upside factors. Our estimates are under review.
