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.
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