Analyst Expects a Muted Reaction From the Market on GUARANTY Q3'15 Results


Thursday, October 22, 2015 10:23AM / FBN Capital Research         

Event: GT Bank reports Q3 2015 results

Implications: Limited changes to consensus full year PBT likely

Positives:  Limited; still on track to meet N120+ bn 2015 PBT target

Negatives: Single digit growth in PBT and PAT y/y; weaker than we had expected 

GT Bank’s Q3 2015 results which were published yesterday evening showed that both PBT and PAT grew by 6% y/y and 8% y/y to N29bn and N23bn respectively.

Although profit before provisions of N56bn grew faster (+10% y/y), provisions rose steeply (+170% y/y, though on the back of base effects) and opex growth of 9% y/y almost matched revenue growth, leading to the slower PBT growth.

Of the two revenue lines, funding income performed much better, growing 18.5% y/y to N40bn. In contrast, non-interest income fell -5.7% y/y to N16.3bn.

Sequentially, both PBT and PAT declined, by -5% q/q and -15% q/q respectively. This was because profit before provisions barely grew q/q (+0.9%), whereas loan loss provisions and opex were up 6% q/q and 8% q/q respectively. The PAT decline was greater as a result of an almost doubling of the tax charge.

Although other comprehensive income grew 139% q/q, this was not strong enough to offset the increase in the tax expense.

Relative to our estimates, the results were weaker than expected, with PBT and PAT coming 13% and 15% below our expectations. The shortfall stemmed from a weaker-than-expected recovery in non-interest income.

Having reported N23.2bn in non-interest income in Q1, GT Bank reported N14.8bn in Q2. Guidance for Q3 was vague, but a recovery was expected. The N16.3bn reported in Q3 is still some way below the Q1 result.

As a result, profit before provisions came in 8% lower than our forecast. Although loan loss provisions surprised positively, coming in 21% lower than our forecast, this was not significant relative to the weakness on the non-interest income line.

The bank’s guidance for full year PBT was maintained after the Q2 results at N120bn (minimum). Historically guidance by management for the full year has been conservative. These results still put the bank on track towards its full year target. The shares have shed -5% ytd (ASI: -13%).

We expect a muted reaction from the market to these numbers.

We rate GT Bank Neutral. Our estimates are under review.

GT Bank Q3 2015  results vs. FBN Capital estimates

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