GCB’s Q3 19 PAT rose 39% yoy to GHS96mn, above our GHS78mn forecast due to higher-than-expected net fee income, which rose by 33% yoy (94% above our forecast) and lower-than-expected net impairment charges (17% below our forecast). Pre-provision profit was up 33% yoy (9% ahead of our forecast). Other positives include a 0.8ppts yoy improvement in margins to 10.7% on our estimates, and a cost/income ratio which fell 3ppts to 64%.
Loan volumes decline but asset quality improves. Net loans were down 9% qoq and the NPL ratio fell 0.9ppts qoq to 7.1%. As with CAL Bank, deposits were flat qoq.
Maintain Buy rating with TP of GHS12.2 and 160% ETR. This is backed by GCB’s strong balance sheet, which we expect to continue to support loan growth. We also see scope for further post-merger consolidation synergies, such as continued reductions in the cost/income ratio and funding costs as the bank reprices more of its expensive deposits. Furthermore, GCB’s current valuation is quite attractive, with 2019f PB of 0.7x – a 28% discount to Ghana peers.
Our recently updated sector report for Ghana banks can be found here.
Table 1: Q3 19 results summary
| GHSmn | Q3 19 | Q3 18 | yoy | Q2 19 | qoq |
|---|---|---|---|---|---|
Net interest income | 299 | 251 | 19% | 284 | 5% |
Non-interest income | 110 | 83 | 33% | 87 | 26% |
Total operating income | 409 | 334 | 22% | 371 | 10% |
Operating expenses | 260 | 223 | 17% | 234 | 11% |
Pre-provision profit | 148 | 111 | 33% | 137 | 8% |
Net impairment charge | 16 | 13 | 24% | 43 | -62% |
Profit attributable to shareholders | 96 | 69 | 39% | 66 | 47% |
EPS | 0.36 | 0.26 | 39% | 0.25 | 47% |
Net loans | 2,857 | 2,692 | 6% | 3,134 | -9% |
Total deposits | 8,535 | 7,349 | 16% | 8,408 | 2% |
NII/assets | 10.7% | 9.89% | 10.3% | ||
Cost/income ratio | 63.7% | 66.7% | 63.1% | ||
ROE | 24.9% | 24.2% | 17.4% | ||
NPL ratio | 7.1% | 5.0% | 8.0% |
Source: Company financials