GTBank HI 2019: Effective Cost Management and Non-Interest Income Support Bottom-Line

August 19, 2019/InvestmentOne Report

·         Non-interest income of N36.1billion, up 2.2% q/q, up 12.7% y/y

·         Profit before tax of N58.8billion, up 3.2% q/q; up 5.6% y/y

·         Profit after tax of N49.8billion, flat q/q; up 3.7 y/y 

GT bank released its financial scorecard last week Friday and posted a fairly decent performance y/y and q/q. While net interest income was flat q/q and y/y. In line with what seems to be the recent trend, non-interest income was up 12.7% y/y and 2.2% q/q. Looking further, PBT and PAT were up 3.2% and 1.1% q/q to N58.8billion and N49.8billion in Q2 2019.

Not surprisingly, with the relatively lower interest rate environment and the general inability for banks to grow their loan books as much as they would like, GT’s net interest margin was down marginally by 6bps y/y to 9.55% in H1 2019, just as net loans remained flat. We note that the 81bps drop in funding costs to 2.3% was enough to cushion the effect of the 101bps y/y fall in asset yields to 12.06%. Also supporting net interest income, was the 25.8% y/y (flat q/q) drop in interest expense to N32.6billion. 

GT BANK PLC Q2/H1 2019 (YE: DEC) (N millions)

 
 

Q2 2019

Q/Q

H1 2019

Y/Y

Interest Income

74,509

0.0%

148,993

-8.0%

Interest Expense

-16,361

0.6%

-32,628

-25.8%

Net Interest Income

58,148

-0.1%

116,365

-1.3%

Non-interest income

36,075

2.2%

71,372

12.7%

Profit before provisions

94,223

0.8%

187,737

3.6%

Loan Impairment charges

-1,535

135.7%

-2,186

7.6%

Total Opex

-33,885

-5.6%

-69,763

0.3%

PBT

58,802

3.2%

115,787

5.6%

Tax

-8,972

16.8%

-16,654

18.5%

Tax rate

15.3%

178bps

14.4%

156.7bps

PAT

49,830

1.1%

99,133

3.7%

Source: Company financials, Investment One Financial Services Research 

Non-interest income on the other hand, grew by 12.7% y/y and 2.2% q/q, largely due to the growth in Fee and Commissions income, which grew 29.2% y/y (down 12.1% q/q) on the back of increased transaction volumes across digital channels. Trading income declined 25.0% y/y (up 23.2% q/q), while the other income line was up 13.3% y/y and 15.1% q/q. Consequently, profit before provisioning rose decently by 3.6% y/y but flat q/q.

In terms of asset quality, as the bank’s NPL ratio was down 20bps YtD to 6.8% (still above management’s FY 2019 guidance of <5%) owing to the combined effect of the 8% YtD decline in absolute NPLs and the marginal decline (1.1% YtD) in gross loans. However, impairments were up 7.6% y/y and almost 1.5x q/q and by extension, Cost of Risk was up 10bp to 0.3%, still well within management’s guidance of <1% in FY 2019.

As always, management was able to contain rise in costs, as total opex was flat in H1 2019 and down 5.6% q/q. Consequently, cost-to-income ratio improved to 37.63% from 38.82% in H1 2018, even as revenue growth was muted. However, ROE was down 42bps y/y to 33.65% but up 85bps q/q. Capital Adequacy Ratio was up marginally by 9bps y/y to 23.48% (up 118bps q/q).

Finally, the bank declared an interim dividend of N0.30k in H1 2019, flat y/y.  

Q2 2019 BANKS COMPARISON SHEET

NGN billion (unless stated otherwise)

 

FBNH

GTB

Key Income Statement Figures

Gross Earnings

145.8

111.5

Net Interest Income

74.2

58.1

Non-interest Income

30.2

36.1

Total Expenses

-74.4

-33.9

Loan Impairment Charges

-13.8

-1.5

Profit Before Tax

19.3

58.8

Y/Y PBT Growth

 

2.6%

3. 1%

Dividend (Kobo per share)

nil

30

EPS (kobo per share)

91

350

Key Balance Sheet Figures

Total Assets

5,580

3,598

Total Liabilities

5,037

2,995

Total Equity

543

603

Key Ratios

Net Interest Margin

7.9%

9.6%

Cost of Fund

3.3%

2.3%

Cost to Income

68.2%

37.6%

NPL ratio

25.3%

6.8%

Liquidity (bank level)

41.8%

47.3%

Cost of Risk

2.7%

0.2%

Capital adequacy ratio (bank level)

16.5%

23.5%

ROE

11.8%

33.7%

ROA

1.1%

5.8%

Source: Company financials, Investment One Research

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