Highlights of GTCO Plc 9M’21 financial performance.

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Dear Esteemed Reader,

Kindly see below the highlights of GTCO Plc 9M’21 financial performance.





  • Recently, Guaranty Trust Holding Company released its Q3 2021 result, which showed a slight increase of 2.1% YoY in PBT to N58.85bn. The marginal improvement in PBT was supported by a 37.5% YoY growth in Non-Interest income to N41.65bn and a 62.1% YoY reduction in loan impairment. This more than offset the 7.5% YoY decline in Net Interest Income (NII) to N68.94bn over the same period. We note that the reduction in Net Interest Income was majorly driven by the 88.2% YoY decline in investment income from its FVOCI securities, as recovery in yields relative to 2020 levels weigh on mark-to-market values of these instruments. However, improved activity levels supported higher fees and commission income over the period with revaluation gains from FX also enhancing other income. Down the P&L line, we highlight that Guaranty Trust Bank’s cost to income ratio increased by 351bps YoY to 37.0% as OPEX rose by 18.3% YoY following increased spending on personnel, depreciation and amortization and other operating expenses.
  • Over the 9M 2021 period, despite the 10.7% YtD increase in total loans, interest income declined by 16.6% YoY to N195.03bn driven by a reduction in Net interest margin to 4.8% from 7.8% in FY 2020. This is largely reflective of the low interest rate environment, which has continued to weigh negatively on asset yields. Although Non-interest income grew by 21.4% YoY, gross earnings over the 9M 2021 period was down by 14.5%, dragged by the lower Net interest income number. Furthermore, annualized 9M 2021’s ROA and ROE prints at 3.4% and 20.8%, which is lower than the 4.6% and 27.1% recorded in FY 2020. On the positive, cost of risk printed at 0.34% in 9M 2021 vs 0.63% in 9M 2020 – which we suspect was supported by the recovery in economic activities.
  • While the company continued to effectively manage its opex/sales ratio (down 146bps YoY to 17.27%), the passthrough impact of elevated input cost pressure on gross margin led operating margin down by 216bps YoY to 21.45% and moderated the improvement in operating profit over the period (+11.83% YoY to N56.12bn). Moving down the P&L, we highlight significant increase in net finance cost (+391.23% YoY to N4.53bn) majorly driven by the significant increase in total loans and borrowing (+191.36% YoY to N71.27bn) and recovery in yields relative to 2020 levels. Consequently, PBT and PAT increased by 4.71% YoY and 5.16% YoY to N51.58bn and N33.58bn respectively.
  • Going forward, we expect non-interest income to continue to drive gross earnings while we await management’s conference call to get more color on the direction of net interest income. Our estimates on the stock are under review.
 

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