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GUARANTY TRUST BANK PLC H1'20 Earnings Release - Bank maintains dividend payout amid mixed earnings

Bank maintains dividend payout amid mixed earnings                                                    

Slide in profits occasioned by higher provisions, Opex

GUARANTY released H1’20 results yesterday, reporting 3% y/y growth in Gross Earnings to ₦228.3 billion. The bank’s Net Interest Income grew 10% y/y to ₦127.6 billion thanks to a 20% moderation in Interest Expense. Meanwhile, Non-Interest Income grew by a modest 2% y/y to ₦74.6 billion, caused by a 30% decline in fees and commissions income to ₦24.7 billion, which offset an impressive 723% y/y growth in foreign exchange gains, a result of the local currency devaluation. On the other hand, provisions rose 210% y/y to ₦6.8 billion, while Opex rose 20% y/y to ₦85.7 billion. As a result of this, PBT came in 5% weaker y/y at ₦109.7 billion, while PAT printed at ₦97.3 billion. This yielded an EPS of ₦3.17 while the bank also declared interim dividend of ₦0.30 (H1’19: ₦0.30).                                                          

H2’20 expectations tempered by mixed Q2 performance

It was generally expected that Q2 performance would be affected by the pandemic-induced lockdown. GUARANTY’s Q2 performance was a mixed bag, with the bank recording flat Interest Income q/q whilst Interest Expense grew 5% q/q. Meanwhile, Provisions grew in excess of 300% q/q to ₦5.5 billion, eclipsing the whole of 2019 provisions (₦4.9 billion) in a single quarter. Looking forward and based on previous years’ pattern, we expect provision growth to moderate in Q3 before another uptick in the final quarter. Furthermore, the bank’s 11% q/q growth in Opex is a deviation from regular pattern, as GUARANTY has historically kept Opex growth in the low single-digits both on a quarterly and yearly basis.