EUR 18.54 For Business Accounts Only

GUARANTY TRUST BANK PLC FY'16 - Record year profit tracks Vetiva estimate, PAT up 33% y/y

·         GUARANTY released FY’16 results, posting record high top and bottom line performances – largely supported by strong earlier run rates (particularly in Q3’16). Despite a 29% q/q decline in Gross Earnings, FY’16 top line was up 38% y/y to ₦415 billion – just in line with Vetiva’s estimate. We highlight that whilst Interest Income remained strong in Q4’16, up 7% q/q, Non-Interest Income was down 92% q/q to a dismal ₦3.6 billion in Q4’16. Surprisingly, the bank recorded less than ₦1 billion in Fees & Commissions (Q3’16: ₦14 billion and Q2’16: ₦19 billion) and just ₦1.6 billion in Other Income (Q3’16: ₦32 billion and Q2’16: ₦60 billion) in Q4’16. We look forward to the bank’s analyst conference call to get further explanations around this sharp moderation in the income line. Having said that, FY’16 PAT was up 33% y/y to ₦132 billion – perfectly tracking Vetiva and Consensus estimates.

·         We have updated our model and revised our forecast to reflect the surprises around loan loss expenses and Non-Interest Income. With our expectation of a more stable FX environment, we estimate a notable moderation in Non-Interest Income. That said, we expect Interest Income to remain strong, supported by our mild 8% real credit growth expectation. Overall, our TP is little changed at ₦31.81 (Previous: ₦32.16). GUARANTY trades at a 2017 P/E and P/BV ratio of 5.5x and 1.5x respectively.