GT Bank surprises market with strong first quarter profit of N50bn

Guaranty Trust Bank’s first quarter results has beaten the expectations of analysts after the bank announced a N50 billion profit for the first three months of 2017 ended March. With the strong performance, analysts at FBN Quest are now forecasting that the bank will meet its full year profit guidance of N168 billion for 2017.

The bank’s N50bn profit for the first quarter represented a 64 percent increase on the comparable profit for the same period of last year while PAT more than doubled to N41bn, due largely to a positive result on the other comprehensive income line of N568m (compared with a sizeable loss of –N5.3bn a year earlier).

Analysts at FBN Quest note that the main driver behind the strong growth in earnings was a solid performance in net interest income, which grew by 62 percent to N66bn.

Surprisingly, non-interest income, which had boosted the bank’s results through most of 2016 on the back of foreign exchange related gains was up only five percent while loan loss provisions of N3.8bn and operating expenses of N32bn both grew by 13 percent and 24 percent respectively. But FBN Quest analysts note “these increases were not sufficient to make any material impact on the results.”

“The results came in well ahead of our expectations: both profit before tax and profit after tax were 17 percent to 18 percent ahead of our forecasts because of the strong net interest income result which surprised positively by 15 percent. The only other notable positive surprise was loan loss provisions. GT booked 16 percent less in provisions than we had forecast. Having said that, given the volatility that is inherent on this line, and that this is only the first quarter of the year, we would not make too much of this variance. Non-interest income and operating expense were close to our forecasts.”

The analysts note that GT Bank’s management “had surprised the market after the fourth quarter 2016 results with a guidance of N168bn in profit before tax for 2017.

“To put this into context, GT Bank had just delivered N165bn for full year 2016 at the time, thanks largely to one-off foreign exchange related gains. As such, the guidance seemed a stretch. Management stressed that its large exposure to fixed income instruments gave it confidence and that the guidance was not aggressive. The results today vindicate management. As such, we would expect to see upgrades to earnings for consensus such that full year PBT forecasts move to at least N168bn. We suspect that the average will settle above N170bn.”

“We would expect a positive reaction from the market to these results. Year-to-date, GT shares have gained 5.5%, outperforming the ASI by 10.1%. Our estimates are under review. We rate GT Bank shares Outperform”
The bank’s share price closed at N26.05 yesterday 26 April.