GT Bank’s Q2 2017 results which were published late yesterday surprised positively. The bank’s Q2 PBT came in around 13% ahead of our forecast. Furthermore, its H1 PBT of N101bn tracks well ahead of consensus 2017 PBT forecast of N168bn. On a y/y basis, Q2 PBT declined by 8% y/y to N51bn. Although a 24% y/y spike in opex contributed, a 67% y/y decline in non-interest income, mainly due to negative base effects arising from strong fx revaluation gains in Q2 2016, was the major driver behind the y/y decline in PBT. These negatives completely offset a 66% y/y growth in funding income to N63bn and a -90% y/y reduction in loan loss provisions. Further down the P&L, PAT declined even more, by -26% y/y, due to negative base effects on the other comprehensive income line (OCI) which came in at N12.9bn in Q2 2016 compared with N601m in Q2 2017. Sequentially, PBT came in flat, mainly because of a 13% q/q increase in opex and a- 4% q/q decline in funding income. In contrast to the y/y trends, non-interest income line grew by 33% q/q.
The bank has proposed an interim dividend of N0.30 which is only slightly higher than our N0.28 forecast and 20% higher than N0.25 paid out in H1 2016. The proposed dividend translates to a dividend yield of 0.8% and a payout ratio of 10.6%.
Despite the y/y decline in PBT for Q2 2017, we expect the market to focus on the fact that (i) non-interest income grew 33% q/q, (ii) that loan loss provisions were modest and (iii) compared with rival Zenith, negative surprises were limited to just opex growing 24% y/y, but even this represented an outperformance relative to Zenith. The better-than-expect results relative to our expectations can be traced to the non-interest income line which surprised by 52%, and to a lesser extent, lower-than-expected loan loss provisions (-50%). The stellar PBT puts the bank on track to beat guidance and consensus forecast of N168bn. At the current run-rate, GT Bank’s results put it on track to deliver a respectable ROAE of 30%+.
Although GT Bank shares have gained 58% ytd (vs. the 38% ytd return on the NSE ASI), we expect the market to react positively.
Our estimates are under review. We rate GT Bank shares Outperform.
GT Bank Q2 2017 results: actual vs. FBNQuest Research estimates (N millions)