October 30, 2024/Cordros Report

Guaranty Trust Holding Company Plc (GTCO) published their 9M-24 unaudited results yesterday (29 October), reporting a 196.0% y/y increase in EPS to NGN38.41 (9M-23: NGN12.98), supported by the sturdy growth across the group’s core (+161.7% y/y) and non-core (+95.2% y/y) income lines.

In 9M-24, GTCO reported a 161.7% y/y growth in interest income to NGN980.34 billion, driven by the impressive income from key contributory lines. In nominal terms, the group generated higher revenue from investment securities (+270.6% y/y to NGN416.95 billion) and loans and advances to customers (+84.8% y/y to NGN392.33 billion), which was sufficient to offset the decline in income from placements with other banks (-89.3% y/y). We highlight that the increase in funded income was driven by the combined impact of elevated rates in the fixed-income market and increases in the HoldCo’s earning assets (+66.0% YTD to NGN12.05 trillion).

Elsewhere, interest expense surged by 158.2% y/y to NGN198.86 billion, triggered majorly by the elevated interest rate environment leading to increased funding costs. As a result, the HoldCo’s interest cost on customers’ deposit holdings rose by 131.6% y/y to NGN161.20 billion, following the deterioration in the group’s funding mix – (CASA 9M-24: 86.3% vs FY-23: 88.6%). At the same time, costs of borrowing advanced by 718.2% y/y to NGN24.35 billion. Consequently, the net interest income rose by 162.6% y/y to NGN781.48 billion. Eventually, the net interest income (ex-LLE) settled 245.0% y/y higher at NGN717.92 billion, following the decline in loan impairment charges (-29.0% y/y to NGN63.56 billion) in the period.

Non-interest income (NII) grew by 95.2% y/y to NGN796.22 billion, spurred primarily by the fair value gains on financial instruments (+116.1% y/y to NGN523.22 billion). Beyond the preceding, the rise in the income generated from net fees and commission (+92.2% y/y to NGN158.56 billion) and FX trading (+99.7% y/y to NGN51.32 billion) were sufficient to outweigh the FX revaluation losses (NGN1.75 billion) recorded. The expansion in NII, alongside the growth in net interest income, led to a 145.8% y/y increase in operating income to NGN1.51 trillion.

Further down, GTCO’s operating expenses grew by 61.3% y/y to NGN294.68 billion, with pressure stemming from personnel expenses (+90.3% y/y to NGN71.53 billion), technological costs (+85.7% y/y to NGN39.35 billion), and AMCON levy (+33.6% y/y to NGN36.66 billion). Nonetheless, the group maintained impressive operational efficiency as the cost-to-income ratio (ex-LLE) settled at 19.5% (9M-23: 29.7%).

Overall, profit before tax advanced by 181.5% y/y to NGN1.22 trillion, while profit after tax grew faster by 195.3% y/y to NGN1.09 trillion, after accounting for the NGN134.46 billion income tax expense.

Comment: GTCO continues to deliver impressive results in line with our expectations, driven by the high-interest rate environment and the group’s operational efficiency. Just as in H1-24, GTCO delivered lower loan impairment charges (-29.0%) despite the challenging macro space, sealing the group’s position as the most efficient lender in Nigeria. We expect GTCO to close the year positively, supported by consistent growth across the group’s core and non-core income lines and an effective cost management strategy. Our estimates are under review.