November 20, 2025/Cordros Report
In this update, we reduced our year-end target price for GTCO to NGN86.39/s (previously: NGN87.14/s) and downgraded the stock to “HOLD”, largely due to a weaker non-interest income. Specifically, the significant drop in fair value gains prompted a downward revision to non-funded income and a lower 2025 EPS estimate of NGN26.21 (previously: NGN28.48). Additionally, the recent capital injection into the banking subsidiary is expected to mildly dilute near-term EPS. GTCO’s 9M-25 results showed a 35.5% y/y decline in post-tax earnings to NGN699.64 billion, as a 44.4% drop in non-interest income offset resilient core earnings growth (+16.8% y/y). That said, we now forecast a gross earnings decline of -5.2% y/y (previously: +3.3% y/y). We also reduced our gross DPS forecast to NGN8.50 (previously: NGN9.20), implying a 10.1% yield at the last closing price of NGN84.00/s. GTCO currently trades at 3.2x 2025E P/E and 0.8x P/B multiples.
Weak non-interest income to pressure earnings: We revised our 2025 forecasts to reflect updated assumptions on asset growth, yields, and non-core income performance. We now expect interest income to grow by 16.8% y/y (Previous: 26.6% y/y), following a downward adjustment to interest-earning asset growth (13.9% y/y vs Previous: 23.3% y/y) and lower asset yields (2025E: 12.6% vs 2024FY: 14.2%). In line with intensified deposit repricing, we also raised our funding cost forecast to +26.3% y/y (Previous: +20.2% y/y). Consequently, net interest income is now expected to grow by 14.3% y/y (Previous: +22.4% y/y). Reflecting the sustained normalization of FX gains and relative currency stability, we revised our non-interest income outlook to a deeper contraction of 44.4% y/y (Previous: -40.6% y/y), despite stronger fee and commission growth (+30.8% y/y vs Previous: +40.0% y/y). Accordingly, operating income is projected to decline by 8.6% y/y (Previous: -2.5% y/y). Although cost pressures have moderated relative to earlier expectations, with an updated OPEX forecast of +16.4% y/y (Previous: +17.9% y/y), the sharper drop in operating income, translates to a cost-to-income ratio of 28.6% (Previous: 26.9%). Overall, we now forecast EPS of NGN26.21 (Previous: NGN28.48), also reflecting equity dilution from the capital raise.
Capital injection strengthens growth capacity: GTCO injected NGN365.85 billion into its banking subsidiary, with an H1-25 CAR of 36.2%. We believe this creates capacity not just for regulatory compliance but for deliberate balance sheet expansion. With funding now secured, the bank is positioned to scale loan growth (+23.2% y/y), resume physical branch expansion plans (NGN138.50 billion earmarked for branch rollout), and deepen digital and payments infrastructure, with a planned spend of NGN98.50 billion on IT investments. More importantly, the strengthened capital base removes prior balance sheet constraints, allowing the bank to pursue higher-yielding assets and accelerate ecosystem monetisation across its various businesses. We believe this supports medium-term earnings potential, with sufficient buffer to support both core income (5-year CAGR: +5.8%) and non-interest revenue growth (5-year CAGR: +19.8%), while preserving resilience against macro or regulatory shocks.
Valuation: Our year-end target price of NGN86.39/s is based on a blended valuation: DDM (60.0%), Gordon Growth Model (30.0%), and relative P/E and P/B (5.0% each). Under the DDM, using a 25.1% CoE, we arrived at NGN92.31/s, while the GGM (CoE: 25.1%, 5-year average RoE: 21.6%) produced NGN88.30/s. For multiples, we applied a 1.8x P/E to our 2025E EPS of NGN26.21/s, giving NGN47.19/s, and a 0.4x P/B to the 2025E BVPS of NGN106.60/s, yielding NGN43.17/s.
