GTBank hits robust Q1 results driven by significant growth in NIR

Guaranty Trust Holding Company (GTCO) released its Q1 24 earnings results on Friday after trading hours. The group delivered outstanding growth in Pre-tax profits (+587.5%y/y) and Net profits (+696.4%y/y). Earnings were primarily driven by gains in Interest Income and Non-interest income, specifically Other income where fair value gains on Financial Instruments surged during the period. The stock is trading 1.2%up y-t-d. We expect the results to drive positive sentiment in the stock.

Financial Performance
The group’s EPS grew by 696.4% y/y supported by solid growth in Non-interest revenues (+219.3% y/y), which made up 63.5% of net revenue (Q1 23: 38.5%). The growth was primarily driven by Other income which surged 2,864.8% y/y following a substantial fair value gain on Financial instruments of N331.55bn.

Net interest income also supported earnings advancing by 176.7% y/y supported by 170.6% y/y growth in interest income, particularly interest earned on customer loans. The group’s Cost of Funds continued to face pressure, rising 73bps y/y, as the Current And Savings Account(CASA) mix deteriorated by 28bps y-t-d.

Elsewhere, Operating expenses also came in higher by 76.9% y/y, following increased Personnel expenses, Communications, Administrative and Technological related expense, and AMCON expenses. Consequently, the Pre-provision operating profit grew 574.4% y/y. Further down the profit or loss statement, Loan impairment provisions rose by 291.8% on the back of increased provisioning for credit risks. Overall, Pre-tax profits grew by 587.5% y/y while the effective tax rate declined to 10.3% (vs 21.5% in Q1 23).

Asset Quality
Overall, asset quality continued to show a positive trend, as the Non-performing loan ratio declined to 3.1% in Q1 24 (Q1 23 : 5.4%) and well below the statutory limit of 5.0%. Elsewhere, the group’s Cost of risk ratio increased to 1.8% adding 107bps y/y.

Conclusion
Looking ahead, the benefits of rising market yields are expected to continue to filter through to interest earnings and further support Net interest income for the rest of 2024.