GUARANTY TRUST BANK 9M'17 - Market leading earnings, PAT beats estimate
GUARANTY TRUST BANK PLC
Market leading earnings, PAT beats estimate
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 Non-Interest 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%).
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.
Guaranty Trust Bank PLC (GUARANTY) is the fourth largest bank in Nigeria. The bank focuses on corporate banking with presence in Nigeria, Gambia, Sierra Leone, Ghana, UK, Liberia, Cote D’Ivoire, Kenya, Uganda and Rwanda. The bank has its primary listing on the Nigerian Stock Exchange and secondary listing as GDRs on the London Stock Exchange.
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