Guaranty Trust Holding Company Plc (GTCO) released its Q1-24 unaudited financial statements on Friday, reporting a whopping 696.1% y/y rise in earnings per share (EPS) to N16.24 for the period under review as against N2.04 in Q1 2023.
The impressive growth in the Holdco’s earnings was driven primarily by the fair value gain on the group’s financial instruments: N331.55 billion compared to Q1-23: loss of NGN99.00 million, coupled with expansion in its funded income line which rose by 170.6% year-on-year.
Interest income advanced by 170.6 percent year-on-year to N281.65 billion, boosted by higher income from loans and advances to customers which recorded (a 91.0 percent rise year-on-year), investment securities (grew by 307.5 percent year-on-year) and cash and balances with banks (+265.9% y/y).
“We note that the Holdco’s earning assets increased by 104.3% YTD to N10.18 trillion as the high yielding environment also supported growth in core income.
“Sequentially, interest expense rose by 147.9% y/y to NGN54.35 billion, primarily driven by the higher interest paid on customer deposits (+141.0% y/y) as the group’s deposits surged to NGN9.20 trillion (YTD: +87.3%).
“We however note that the Holdco recorded a slight deterioration of its funding mix (CASA as at Q1-24: 88.3% vs FY-23: 88.6%). Accordingly, the Holdco recorded a 176.7% y/y increase in net interest income”, said analysts at Cordros Securities.
Following higher charges for loan impairments (which rose by 291.8 percent y/y), the net Interest income (ex-Lifelong Loan Entitlement) settled to N213.81 billion, translating to a 171.7 percent y/y growth.
GTCO witnessed a remarkable 666.4% y/y increase in its non-interest income to N394.86 billion, majorly driven by the N331.55 billion fair value gain recorded for the Holdco’s financial instruments (Q1-23: loss of N99.00 million) as income from net fees and commission (+74.5% y/y) and FX trading (+48.9% y/y) also increased. Elsewhere, we highlight that the group recorded a higher FX revaluation loss of N12.67 billion (+145.1x y/y) in Q1-24.
Operating expenses (OPEX) grew by 76.9% y/y to NGN99.33 billion following the higher personnel expenses (+114.4% y/y) and regulatory fees – AMCON levy (+33.7% y/y) and deposit insurance premium (+48.5% y/y). Given that operating income (367.4% y/y) grew faster than OPEX, the group’s operational efficiency improved significantly as its cost-to-income ratio (ex-LLE) settled at 16.3% (Q1-23: 43.1%).
As expected, GTCO’s profitability was stronger, with profit-before-tax settling 587.5% higher year-on-year to NGN509.35 billion. After accounting for a higher income tax charge of NGN52.21 billion (+227.9% y/y), PAT settled at NGN457.13 billion (+685.9% y/y).
“We like the stellar earnings performance put out by GTCO in Q1-24 as the income from its funded and non-funded lines were robust. Going into 2024E, we are positive that the Holdco’s interest income will remain buoyant given the high yielding environment,” Cordros Securities said in a note to their clients.
About the Author
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
