Stock & Analyst Updates | |
Stock & Analyst Updates | |
2741 VIEWS | |
![]() |
Thursday, October 19, 2017 9:28 AM /Vetiva Research
·
Earnings
beat despite weaker top line
·
Contained
loan loss provision – 44% better than our estimate
·
Cautious
credit stance, loan portfolio declines 10%
Earnings
beat despite y/y moderation in top line
GUARANTY
continues to post strong earnings performance with PAT coming in ahead of our
estimates – beating already impressive earnings run rate. Whilst Gross Earnings
moderated 6% y/y to ₦310 billion (3% below
our estimate), PAT rose 5% y/y to ₦126 billion – ahead of our ₦115 billion estimate and
translating to a notable 41% PAT margin.
Amidst
a return to normalcy of NonInterest Income (down 59% y/y) - following prior
year’s high base due to huge FX revaluation gains and E-business income,
Interest Income rose 36% y/y – tracking our ₦249 billion estimate. In line with the general
industry trend, high interest rate environment and strong yield on assets
continue to support top line performance despite weak credit growth (ytd:
-10%).
Furthermore,
GUARANTY continued to benefit from the improving macroeconomic environment,
reporting a modest ₦8.4 billion loan loss
provision vs. our ₦14.8 billion estimate
and significantly lower than the ₦57.1 billion reported in 9M’16. Also, with
Operating Expense contained to a modest 9% y/y growth (11% lower than our
estimate), PAT came in at a record high of ₦126 billion.
On
a q/q basis, we highlight the upward trending Interest Expense (up 22% q/q) and
the significantly weak Non-Interest Income (Q3’17: ₦12.6 billion – lowest
normalized quarterly performance in over the last 4 years) as a cause of
concern. However, strong Interest Income, moderating OPEX, and improving asset
quality should bode well on earnings going forward.
Target
Price revised to N43.63 (Previous: N39.15)
We
have revised our model to reflect the deviations across most line items. Notably,
we cut our loan loss provision to ₦12.5 billion (Previous: ₦19.8 billion) to reflect
the lower than expected NPL formation rate. Also, despite revising our loan
growth forecast to -5% (Previous: 0%), we maintain our Interest Income estimate
at ₦332 billion, supported
by the elevated interest rate.
However,
we cut our Non-Interest Income to ₦83.0 billion (Previous: ₦92.8 billion). That
said, we remain cautious and forecast a higher run rate for Operating Expense
in Q4’17, translating to ₦122 billion (Previous: ₦128 billion) for FY’17.
Overall,
we raise our FY’17 PAT forecast to ₦162 billion (Previous: ₦153 billion) –
translating to an EPS of ₦5.49 (Previous ₦5.20). GUARANTY trades
at a premium to industry peers with P/B and P/E ratios of 2.1x and 7.6x vs.
Tier I average of 1.0x and 5.2x respectively.
Related News
2.
GUARANTY Declares N125.58bn PAT in Q3 2017
Results;(SP:N41.70k)
3. GUARANTY Declares N125.58bn PAT in Q3
2017 Results;(SP:N41.70k)
4. Nigeria-Based Guaranty Trust Bank 'B-B'
And 'ngBBB-ngA-2' Ratings Affirmed; Outlook Stable
5. GTBank Plc H1 2017 Conference Call &
Earnings Presentation - The Key Takeaways
6. Guaranty Trust Bank Plc - Earnings
Advance on Lean Provisioning
7. GTBank Reports Q2 2017 Results - Non-Interest Income Declined
by 67% YoY
8.
GUARANTY Declares N83.68bn PAT in Q2
2017 Results; Proposes 30k Interim Dividend,(SP:N38.92k)
9.
Guaranty Trust Bank Plc Announces Board
Meeting Date and Closed Period
10. GTBank Launches New Mobile App, GTWorld
with Biometric Authentication
11.
GUARANTY Declares N41.48bn PAT in Q1
2017 Results,(SP:N26.05k)
12. Guaranty Trust Bank Plc - Notice of
Effectiveness of Issuer Substitution