October 13, 2026/Cordros Report
In this update, we revise our 2026E outlook and lower our target price to NGN140.50/s (Prev.: NGN155.97/s), implying a 7.2% upside and a HOLD rating. The downgrade primarily reflects a more cautious balance sheet growth outlook, as management has deliberately moderated loan growth given the relatively low attractiveness of corporate lending vs. treasury bills at current yields. We consequently lower our 2026E loan growth forecast to 7.0% y/y from 25.0%, while also reducing our deposit growth forecast to 15.0% y/y from 30.0% amid intensifying competition for funds. This, alongside a higher cost of funds assumption of 2.0% versus 1.8% previously, weighs on our earnings outlook. Consequently, we now expect PBT to grow by a marginal 2.3% y/y in 2026E, compared with our previous forecast of 10.1%. However, we raise our payout ratio assumption to 60.0% from 50.0%, in line with management guidance, resulting in a 2026E DPS of NGN15.99/s and a dividend yield of 12.2% based on the last closing price of NGN131.00/s. At the current price, GTCO trades at 1.2x 2026E P/B and 4.9x 2026E P/E.
Slower Balance Sheet Growth Tempers Growth: Our earnings downgrade is primarily driven by weaker interest income and non interest income, alongside higher funding costs. We now expect gross earnings to grow by 7.1% y/y to NGN2.30 trillion in 2026E (Prev.: +15.1% y/y to NGN2.48 trillion). Interest income is projected to rise by 7.4% y/y to NGN1.78 trillion (Prev.: +14.1% y/y), reflecting slower loan growth and lower securities yields. Additionally, interest expense is now expected to increase by 14.0% y/y to NGN447.43 billion (Prev.: +7.8% y/y), resulting in NII growth of 5.4% y/y to NGN1.33 trillion (Prev.: +16.1% y/y) and a lower NIM of 10.7% (Prev.: 10.9%). Non interest income is also expected to provide less support, with growth revised to 6.2% y/y to NGN528.23 billion from our previous forecast of 12.4% y/y, primarily due to a lower net fee and commission income forecast of NGN249.79 billion (Prev.: NGN319.41 billion). These pressures are partly cushioned by a 48.0% y/y decline in impairment charges to NGN34.55 billion. However, the weaker revenue outlook, combined with a higher CIR of 28.6% (Prev.: 25.0%), weighed on earnings. We therefore forecast PBT of NGN1.26 trillion (+2.3% y/y), and PAT of NGN894.53 billion, (+3.3% y/y), compared with our previous forecasts of 10.1% and 9.9%, respectively.
Medium Term Earnings Adjusted for Lower Rates: The MPC’s 350bps MPR cut, from 26.50% to 23.00%, is likely to moderate GTCO’s core earnings trajectory over the medium term. Historically, the year following a rate-cutting cycle has seen some moderation in the bank’s core earnings. Following the 200bps of cuts in 2020, interest income declined by 11.3% y/y in 2021, while net interest income fell by 13.0% and NIM compressed by 252bps to 6.7%. As such, we expect the repricing of assets to weigh on earnings beyond 2026E. Accordingly, we reduce our 2027E and 2028E interest income growth forecasts to -0.4% and 8.9%, respectively, from 10.0% and 11.5%, and lower our NIM forecasts to 9.0% and 9.2% from 10.9% and 11.2%, respectively.
Valuation: Our target price of NGN140.50/s (Prev: NGN155.97/s) is derived from an equal weighted blend of the DDM and a Gordon Growth framework. Under the DDM, applying a 21.9% COE and a 60.0% payout ratio, we arrive at a year-end target price of NGN141.85/s. Similarly, the GGM, anchored on the same COE and a 5-year average RoE of 24.7%, resulted in a year-end target price of NGN139.14/s.