Background
Guarantee Trust Bank Plc, Nigeria’s most profitable bank, was incorporated in 1990 and began operations in 1991.
It later converted to public Limited company and listed on the Nigeria Stock Exchange in 1996.
GTBank is listed on the London Exchange through the listing of it $750 million Global Depository in July 2007.
The bank has experienced sustained growth over the last decade and is now a top tier 1 bank in Nigeria.
GTBank has a network of 212 branches and an assets base of N2.2 trillion as at 31 March 2014.
It also has total shareholdings of 29.43 billion with shareholders funds of N352.89 as at 31 March 2014.
One of the few Nigeria banks that place emphasis on international recognition and world standards in corporate governance as a deliberate corporate strategy, the bank’s primary business is corporate banking; however, since 2005 it has placed an increasing emphasis on expanding its retail business.
Financial performance for 1Q14
Guarantee Trust Bank (Guaranty) Nigeria largest lender by market value has witness slow growth in the third quarter 2014 as key measure of profitability declined.
Based on analysis by BusinessDay, high operating expenses have squeezed returns profitability and investment.
Two banks analyses United Bank for Africa (UBA) and Fidelity Bank that have so far released 1Q14 result showed similar unimpressive operational performance.
For the three months period through March 2013, GTBank recorded a single digit growth in gross earnings by 6 percent y/y N67.57 billion from N63.86 billion in 1Q13.
Profit before tax (PBT) in the review period slumped by 2 percent to N28.0 billion compared to N28.49 billion same period of the prior year (Q1’2013).
The above abysmal figure has been substantiated following the recently rebased GDP which shows the financial sector contributing $16.78 billion (N2.64 trillion) to the total estimates of $510 billion (N80.22 trillion).
Profit after tax (PAT) increased slightly by 2 percent to N23.11 billion in 1Q14 as against N22.55 billion in 1Q13.
Earnings per shares EPS in the review jumped by also declined marginally to 81k from 80k in 2013.
Based on the BusinessDay analysis, net margin, which is a gauge of profitability and efficiency, fell to 34.2 percent in 3M14 from 35.31 percent in 3M13.
Returns to the owners of the bank were also affected by the slow growth in bottom line performance.
The Return on Average Equity ROaE slid to 65.48 percent from 67.85 percent for Q1’2013, while Return on Average Assets ROaA declined to 10.50 percent from 10.70 percent for Q1’2013.
Interest income increased by 7 percent y/y to N48.52 billion in 1Q14 compared to N45.27 billion in 1Q13, while interest expense surged by 17 percent to N13.79 billion in the review period.
As a result of the huge interest expense, Net interest income was up slightly 4 percent to N37.74 billion in 3M14 from N33.44 billion in 3M13.
It was indeed a challenging economic environment as the Central Bank’s tightening stance has been crimping the growth prospects of most Nigeria banks.
GTBank’s total assets were up 4.76 percent y/y to N2.20 trillion in 1Q14 as against N2.10 trillion in 1Q13.
Total loans and advances to customers increased by 5 percent y/y to N1.05 trillion in Q1’2014 compared to N1.0 trillion in Q1’2013.
Total deposits to customers in the period 1Q14 climbed by 3.44 percent y/y to N1.49 trillion from N1.44 trillion in the corresponding period of March 2013.
Share performance and Outlook
The shareholders of the bank have had their value maximized as share price has been increasing in the past year by 15.97 percent to close at N27.20 on the 22rd of April 2014 on the floor of the Nigeria Stock Exchange (NSE).
Total market capitalization was N796.11 billion on the same day.
The bank also has a Price to book ratio of 2.3x and a price to sales ratio of 3.1x respectively.
BALA AUGIE
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