GTCO released its H1’23 results, reporting a 330% y/y growth in Gross Earnings to ₦515 billion in Q2’23. The earnings improvement in Q2’23 came as a result of a 59% and 900% y/y rise in Interest Income and Non-Interest Revenue (NIR) to ₦121 billion and ₦388 billion respectively. This was driven by the combination of a 26% y/y increase in interest from loans and a 176% y/y increase in income from T-bills and investment securities, due to the sustained rate hikes by monetary authority to stem inflationary pressures.

 

Q2 earnings elevate growth projections

GTCO’s Q2 numbers showed an increase in the bank’s balance sheet size, which has expanded by 32% year to date. Specifically, the bank’s loan book increased by 23% y/y, and we expect further gains in H2, while we expect yield on assets to remain strong. Therefore, although we raise our Interest Income figure to ₦457 billion (Previous: ₦417 billion), we also raise our Interest expense projection to ₦106 billion (Previous: ₦95 billion), which gives a new NII figure of ₦351 billion (Previous: ₦322 billion). 

 

TP revised to ₦48.00 (Previous: ₦46.00)

Based on our new projections, we have an expected EPS of ₦20.76 per share (Previous: ₦10.28). We also raised our dividend projection to ₦4.50 per share (Previous: ₦4.20), following an interim dividend declaration of ₦0.50/share. All in, we revise our 12-month Target Price (TP) to ₦48.00 (Previous: ₦46.00). GTCO is currently trading at a P/B ratio of 1.01x vs. Tier I averages of 0.5x. The stock has gained 76% YTD and is trading at a 19% discount to our TP.