Earnings Report /
Ghana

GCB Bank: Q3 19 results: Non-interest revenue growth boost earnings; reiterate Buy

    Nkemdilim Nwadialor
    Nkemdilim Nwadialor

    Equity Research Analyst, Financials

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    Olabisi Ayodeji
    Olabisi Ayodeji

    Equity Research Analyst, Banks (Africa)

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    Tellimer Research
    29 October 2019
    Published byTellimer Research

    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

    GHSmnQ3 19Q3 18yoyQ2 19qoq

    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