GTBank Results Review: Q1 2020 PBT Tracking in Line With FY Guidance
Limited revisions to our 2020E EPS forecast
GT Bank's (GTB) Q1 2020 PBT was in line with our forecast. However, PAT missed by -4% because of a negative result of -N2.7bn in other comprehensive income. Following the results, we have made modest revisions to our 2020E EPS forecast (-1.3%). However, we have cut our price target by -10.9% to N52.0 because of a higher equity risk premium assumption (7.5% vs 6.5% previously). On an annualised basis, GT Bank's Q1 PBT of N58.2bn tracks broadly in line with management's 2020 PBT guidance of N235bn and implies an (annualised) ROAE of 28.4%, compared with guidance of >25%.
The ROAE implied by our 2020E forecast is slightly more conservative at 26.6%. In terms of asset quality, GT Bank's NPL ratio improved by 50bps y/y to 6.0% vs. 2020E guidance of 5.0%. Although strong loan growth of 8% q/q helped, we are encouraged to see the improvement in asset quality in absolute terms (-2% q/q reduction in absolute NPL to N100.6bn). Having shed -37.3% ytd vs. -15.1% for the NSE ASI, GTB shares now trade on a 2020E P/B multiple of 0.7x for a 2021E ROAE of 24.2x.
The multiple represents a severe contraction of -44% to the 1.3x multiple that the shares were trading on in January 2020. Our new price target of N52.0 implies a significant potential upside of 180% from current levels. As such, we retain our Outperform rating on the shares.
Q1 PBT up by low-single-digits
GTB's Q1 2020 pre-provision profits grew by 6% y/y to N99.2bn. The improvement in pre-provision profit was driven by a 10% y/y increase in funding income, which was underscored by solid loan growth of 8% q/q. In contrast to the funding income growth, non-interest income was flat y/y. The single-digit growth in pre-provision profit was strong enough to offset an 11% y/y rise in opex and a spike (+88%y/y) in impairment for credit losses.
Further down the P&L, PAT declined by-8% y/y to N46.9bn mainly because of a negative result of -N2.7bn in other comprehensive income (OCI). Sequentially, PBT declined by -5% q/q on the back of a 27% q/q increase in opex. Below the tax line, the negative result in OCI resulted in PAT declining by a wider margin of 12% q/q.
Limited revisions to our 2020E EPS forecast
GT Bank's (GTB) Q1 2020 PBT was in line with our forecast. However, PAT missed by -4% because of a negative result of -N2.7bn in other comprehensive income. Following the results, we have made modest revisions to our 2020E EPS forecast (-1.3%). However, we have cut our price target by -10.9% to N52.0 because of a higher equity risk premium assumption (7.5% vs 6.5% previously). On an annualised basis, GT Bank's Q1 PBT of N58.2bn tracks broadly in line with management's 2020 PBT guidance of N235bn and implies an (annualised) ROAE of 28.4%, compared with guidance of >25%.
The ROAE implied by our 2020E forecast is slightly more conservative at 26.6%. In terms of asset quality, GT Bank's NPL ratio improved by 50bps y/y to 6.0% vs. 2020E guidance of 5.0%. Although strong loan growth of 8% q/q helped, we are encouraged to see the improvement in asset quality in absolute terms (-2% q/q reduction in absolute NPL to N100.6bn). Having shed -37.3% ytd vs. -15.1% for the NSE ASI, GTB shares now trade on a 2020E P/B multiple of 0.7x for a 2021E ROAE of 24.2x.
The multiple represents a severe contraction of -44% to the 1.3x multiple that the shares were trading on in January 2020. Our new price target of N52.0 implies a significant potential upside of 180% from current levels. As such, we retain our Outperform rating on the shares.
Q1 PBT up by low-single-digits
GTB's Q1 2020 pre-provision profits grew by 6% y/y to N99.2bn. The improvement in pre-provision profit was driven by a 10% y/y increase in funding income, which was underscored by solid loan growth of 8% q/q. In contrast to the funding income growth, non-interest income was flat y/y. The single-digit growth in pre-provision profit was strong enough to offset an 11% y/y rise in opex and a spike (+88%y/y) in impairment for credit losses.
Further down the P&L, PAT declined by-8% y/y to N46.9bn mainly because of a negative result of -N2.7bn in other comprehensive income (OCI). Sequentially, PBT declined by -5% q/q on the back of a 27% q/q increase in opex. Below the tax line, the negative result in OCI resulted in PAT declining by a wider margin of 12% q/q.
