Earnings, price target, Neutral rating unchanged: Following GT Bank’s Q1 2013 results, we have kept our earnings forecasts for 2013 and 2014 unchanged, and our N22.5 price target also. Essentially, we have not carried forward the positive surprise on the non-interest income line, given its lumpy nature. Other key headline items on the P&L were not significantly different from our expectations.
The annualised Q1 2013 ROAE comes out at 30.1%, but we would expect this to trend down through the year. Our 2013E ROE estimate of 26.3% compares with guidance of “above 25%”. Ytd, GT Bank shares have gained 5.3% but have underperformed the All Share Index by 12%. At current levels, we feel our expectation of the bank’s best-in-class ROAE (2014E est. of 27.1%) is adequately captured by the 2.2x 2013E P/B multiple that the shares are trading on. We retain our Neutral rating.
Healthy y/y growth in earnings in Q1 2013: GT Bank’s Q1 2013 net interest income grew 6.3% y/y and non-interest income grew 51.4% y/y. These more than offset increases in provisions and, particularly, a 16.7% y/y rise in operating expenses to drive PBT up 16.9% y/y, and PAT 19% y/y. Sequentially, PAT was down 3.7% q/q. Most of the q/q trends were distorted by a lumpy Q4 2012 which saw a tax rate of just 12.2% (the tax charge increased 86.5% q/q). Notwithstanding, it is worth mentioning that non-interest income grew by an impressive 75.1% q/q.
Very strong (and typically lumpy) non-interest income: Relative to our expectations, PBT was ahead by 17.4%, and PAT by 10.4% (the tax rate of 20.8% was higher than the 17.0% we had modelled). The main driver behind the positive surprise was non-interest income which exceeded our forecast by 41%. Funding income was only 2.9% above our forecast: both interest income and interest expense were above our forecast, implying that our yield expectations may have been slightly lower than GT Bank recorded. On the balance sheet, net loans grew 5.4% q/q and deposits, 5.6% q/q. The loan growth indicates GT Bank is on track relative to its 20% guidance for the full year.
