GTBank Q3 2019 Result: Decent Performance Despite Tough Regulatory and Operating Environment

October 18, 2019/InvestmentOne Report

·         Net interest income of N56.6billion, down 2.7% q/q; up 1.3% y/y

·         Non-interest income of N28.6billion, down 20.7% q/q, up 2.8% y/y

·         Profit before tax of N54.9billion, down 6.7% q/q; up 3.9% y/y

·         Profit after tax of N47.9billion, down 4.0% q/q; up 3.4 y/y  

GT bank kicked off 9M earnings season as it released its financial scorecard to the NSE yesterday. PBT and PAT were up 3.9% and 3.4% y/y to N170.6billion and c.N147.0billion respectively, driven by a marginal rise (1.3% y/y) in net interest income, a 2.8% y/y increase in non-interest income and a 2.2% y/y decline in total opex.

However, on a sequential basis, the negative impact of the tough operating environment was more apparent, as PBT and PAT declined by 6.7% and 4.7% respectively, on the back of the 2.7% q/q drop in net interest income and 20.7% q/q fall in non-interest income, which offset the 12.0% q/q decline recorded in total opex.

Tough Regulatory Environment Weighs in on Earnings

Of course the first thing that caught our eye was the 8.5% YtD rise in net loans, which may not be unconnected with the CBN’s mandate to banks to maintain a minimum Loan-to-Deposit ratio of 60% as at 30th September 2019. However, interest income was down 5.6% y/y (in line with our expectations) and it appears the race to meet up with the deadline target would have reduced profit margins for most lenders.

We recall that GT bank was debited a total of N25.1billion as at 30th September, for failure to meet up with the target as at the deadline date. However, reliable sources (albeit unofficial) suggest that the CBN refunded c.N200billion, to banks, whose LDR position improved between the 26th (debit date) and the 30th (deadline date), out of the total c.N500billion it debited from banks. From our calculations, GT Bank’s LDR stood at 60.7% as at 30th September 2019, so we opine that it would have also benefitted from the refunds.

Nonetheless, non-interest income was up marginally y/y but fell significantly (down 20.7%) q/q. This was on the back of the 20.1% decline in net fee and commission income and the 39.6% q/q decrease in FX discounts and recoverables, despite the N4.6billion in derivative gains recorded during the quarter. This was surprising, given the 5.0% YtD rise in deposits (We would have to reach out to management to provide clarity as to why this happened, as there usually isn’t any investor call for 9M results).

Improving Asset Quality and Continuous Cost Containment

The bank continues to impress in terms of cost containment and asset quality, with cost to income and NPL ratios of 36.5% and 5.6% respectively (versus 38.0% in 9M 2018 and 7.3% in FY 2018 respectively). The former was driven by the 2.9% and 7.3% y/y decline in personnel expenses and other operating expenses respectively, which translated to a 2.2% y/y (12.0% q/q) drop in total opex.

On the other hand, absolute NPLs were down 18% YtD and coupled with the loan book growth, the bank’s NPL improved to 5.6%, slightly ahead of management’s guideline of <5%. However, with the review of the CBN’s LDR target to 65% as at 31st December 2019, we opine that the bank would not find it difficult to meet its set target. Similarly, cost of risk stood at 0.3% (well within management’s guideline of <1%), even though impairments were up 48.3% y/y (down 69.7% q/q).

In conclusion, we think this was a decent performance by the bank, given the tough operating and regulatory environment so far this year. As we do not have any target price for this stock, we proffer a Bloomberg consensus Target Price of N47.50, implying an upside potential of 75.9%, based on its closing price of N27.0 yesterday. Furthermore, with an ROE of 33.0%, GT Bank remains a top pick for our clients. 

GT BANK PLC Q3/9M 2019 (YE: DEC) (N millions)


Q3 2019


9M 2019


Interest Income





Interest Expense





Net Interest Income





Non-interest income





Profit before provisions





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Total Opex















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Source: Company financials, Investment One Financial Services Research

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