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Stock & Analyst Updates | |
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Wednesday, March 14, 2018 /01:26 PM / FBNQuest Research
Event: GT Bank reports Q4 2017 results
Implications: Slight
positive reaction once the market has digested the figures properly
Positives: PBT grew
by 85% y/y, thanks to a 736% y/y growth in non-interest income
Negatives: Funding income declined by 9% y/y; we est. NPL ratio
rose to c.8% from 3.9% in Q3
GT Bank’s (GTB) Q4 2017 results which were published
this morning came in strong. The results showed that PBT grew by 85% y/y to
N50.2bn. Although non-interest income which grew by 736% was the main driver
behind the strong earnings growth, a 54% y/y decline in loan loss provisions
also helped. Funding income declined by -9% y/y.
However, the strong performance in non-interest income
completely offset the weakness here, resulting in a 31% y/y expansion in
pre-provision profits. Further down the P&L, PAT grew even faster at 227%
y/y, due to a -56% reduction in income tax (tax rate of 10.6% compares
with 44.0% in Q4 2016) and a significant increase in other comprehensive income
(OCI); the latter was mainly driven by fair value gains on available for sale
securities.
Sequentially, while PBT was up by around 3% q/q, PAT
grew by 16% q/q, thanks to the positives on the tax and OCI lines. Compared
with our forecasts, PBT beat by 20% largely because of the positive surprises
in non-interest income and loan loss provisions. However, the beat on the PAT
line was greater at 73% because of the positive surprises in tax and OCI (for
which we had no forecast). Our PBT forecast was close to consensus.
On a full year basis, GTB’s PBT and PAT were up by 21%
y/y and 26% y/y respectively. Management has proposed a dividend of N2.40 per
share, higher than our N2.09 estimate. The proposed dividend imply a yield of
5.2% and a payout ratio of 39.7%. One negative in the results is an uptick in
the bank’s NPL ratio which we estimate to be c.8%, up from 3.9% in Q3 2017. The
cumulative provisions set aside for these NPLs are also down y/y.
Pending management’s comment on the asset quality
metrics, we believe this could be because GT Bank had substantial regulatory
risk reserves of c. 200% as at Q3 2017. It would appear that the bank did not
book any (material) additional provisions relating to 9mboile in Q4 beyond the
N6bn it had set aside as of H1 2018, in line with comments made on the H1
conference call.
Despite the better-than-expected results and
dividends, the shares are weak today (-5% vs ASI -0.5%). This could be due to a
combination of profit-taking (ytd the shares are up 16.7% vs ASI’s 12.6%),
concerns as to the sustainability of the non-interest income line going into
2018 (at least N22bn of the N29.8bn recorded in Q4 non-interest income are
one-off in nature) and the asset quality trends we discussed already.
Our estimates are under review. We rate GT Bank shares
Neutral.
Conference call details: TBC
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