Following an impressive H1 2018 performance, analysts at Cordros Capital have said that the GTBank’s knack for cost efficiency and an expected improved non-interest revenue (NIR) will see gross earnings in 2018 grow by 9 percent, and have, therefore, placed a buy recommendation on the shares of GTBank.
The Cordros Capital analysts specifically noted that the pace of growth of operating expenses will slow down in 2018 by 6.0 percent year-on-year, compared to 8 percent of FY 2017, and their cost-to-income ratio will reduce to 36.0 percent as against 36.72 percent in the previous year.
“We remain optimistic of the positive contribution of e-business income to fees & commission (F&C) income. Corporate finance fees and commission on forex deals are also expected to boost growth in F&C income in 2018. We also forecast growth in gains on held-for-trading instruments, as well as on other income to support our forecast of growth of the NIR,” the investment advisors said.
Adding that, “We forecast EPS growth of 8.27 percent y/y to N6.27 in 2018. Based on updates to our model, we estimate trading price of N52.45 for GUARANTY’s shares, translating to the upside potential of 34.3 percent, with a BUY rating. On our estimates, GUARANTY trades at forward P/E multiple of 8.36 times.”
Among peers, GTBank leads with the lowest cost of risk (CoR) of 0.29 percent in the period under review. As a result, the bank witnessed a faster decline in impairment charges than compared to loans. The decline in impairment charges originates from the payoff of some of the bank’s loans particularly in the upstream oil & gas sector, which led to a contraction in the loan book
The tier-1 bank’s half-year result showed gross earnings grew by 5.85 percent year-on-year to N226.63 billion following a 31.95 percent growth in non-interest income (NIR).
In a similar vein, profit before tax (PBT) and profit after tax (PAT) also grew by 8.44 percent and 14.22 percent respectively, as operating expenses grew marginally 2.02 percent.
Frontpage January 27, 2018