The foremost Institutional bank, GTBank, has published its Q3 2017 results which showed that profit before tax (PBT) and profit after tax (PAT) declined y/y, by 7% and 15% respectively.
According to the report, gross earning dropped by 5 percent, from N329 billion in Q3 2016 to N309 billion.
“However, thanks to positive surprises in operating expense and loan loss provisions, PBT and PAT declined by -6% y/y and -10% y/y to N48.9bn and N43.8bn respectively. PAT year to date stood at N125.58 billion. A growth of 7 percent from the N117.081 record in the same period last year,” it reads.
The report states further: “The y/y decline in earnings was driven by a 73% y/y reduction in non-interest income due to negative base effects in the prior year (GT Bank’s 9M 2016 earnings were boosted by fx revaluation gains of N93.6bn vs. N11.7bn 9M 2017). Funding income grew by 12% y/y.
“However, the reduction in non-interest income proved significant and was the major driver behind the 27% y/y decline in pre-provision profits. Although opex and loan loss provisions declined by 20% y/y and 94% y/y respectively, partially offsetting the reduction in non-interest income, PBT still fell by -6% y/y.
“Further down the P&L, PAT declined even more, by -10% y/y, because of a 66% y/y decline in other comprehensive income (OCI). Sequentially, PBT and PAT showed single digit percentage changes relative to Q2. Again non-interest income which was down by 53% q/q underpinned the sequential decline in earnings.
“Despite the y/y decline in earnings, we expect the market to focus on the broad positives, particularly the y/y decreases in opex and loan loss provisions. Notwithstanding, the weakness in non-interest income and the q/q decline in funding income will concern investors. “
When annualised, GT Bank’s 9M 2017 PAT implies a respectable ROAE of around 32%; this is among the highest in the universe of bank stocks.
Although the bank’s shares have gained 65% ytd (vs. a 36% ytd return on the NSE ASI), it expects a slight positive reaction from the market.