Following a stellar H1'23 performance on the back of the material FX revaluation gains, we expect GTCO's FY'23 earnings to surpass our prior estimate of N251.6 billion to reach N338.72 billion. Our adjusted FY'23 earnings (+100.2% YoY) account for the higher-than-expected revaluation gain of N357.1 billion reported in H1'23 and the accretive impact of higher yields on the bank's net interest income (NII).
We expect NIM to settle at 7.4% in FY'23, higher than the 7.1% reported in FY'22. The higher NIM will likely reflect an increase in loans and a more elevated interest rate environment. That said, our projected NIM is lower than the bank's 7.5% - 7.9% guidance for FY'23. This cautiousness is supported by the huge proportion of the bank's total fixed-income securities earning c.0.5% in special bills (c.48.0% of total fixed-income securities) compared to a funding cost of 1.4%. In addition, the bank's LDR ratio of 37.1% (vs regulatory requirement of 65.0%) puts it at risk of further discretionary CRR debits from the CBN.
