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GURANTY TRUST HOLDING COMPANY 9M'21 Earnings - Q3 Earnings Improvements Boost Profit Outlook

Q3 earnings improvements boost profit outlook                                                           

GTCO released its 9M’21 results yesterday, reporting a 12% y/y decline in Gross Earnings to ₦319 billion. We recall that, as at H1, the bank’s earnings were 16% weaker y/y, but a solid performance in Q3 helped cut the decline. The bank’s Loan book grew by 6% q/q to ₦1.7 trillion, while Asset yield remained stable at 7.8% for the quarter, which boosted Interest Income by 5% q/q to ₦69 billion, as income on investment securities grew 20% q/q. On the other hand, the bank reported a 17% q/q increase in Interest Expense to ₦13 billion, with cost of funds worsening by 10bps to 1.3%. As a result, the bank reported Net-Interest Income of ₦56 billion in Q3, a slight 2% q/q improvement.

The improvements meant that, for the 9M period, the bank recorded Interest Income of ₦195 billion (-15% y/y) and Net Interest Income of ₦163 billion, 14% weaker y/y, but better than H1’21 performance (-16% y/y). However, driven by a 58% increase in Net fees and commissions to ₦52 billion – mainly the result of a 91% jump in electronic banking income, the bank continued to show resilience in its Non-Interest Revenue (NIR) lines. Nevertheless, we note that this performance fell slightly short of our ₦120 billion expectation.                                                           

Furthermore, the bank enjoyed the double-boost of a 24% y/y decline in credit impairments and a significant jump in loan recoveries, which drove a 41% y/y drop in loan loss impairments for the 9M period to ₦6 billion, although NPLs worsened slightly to 6.1% from 6.0% in H1. We also note that in Q3, impairments fell 55% q/q to ₦1.3 billion as general economic recovery and higher crude prices during the period prompted lower credit provisions and boosted repayments of loans previously reported as lost.