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H1 financial scorecard strengthens ‘Buy’ ratings for GTCO shares

Impressive H1 financial scorecard strengthens ‘Buy’ ratings for GTCO shares

Guaranty Trust Holding Company Plc (GTCO) recently released its audited consolidated and separate financial statements for the half year (H1) period ended June 30, 2023.

The H1’23 financials

The group’s results at both the Nigerian Exchange Group (NGX) and London Stock Exchange (LSE) showed its H1’2023 gross earnings rose to N672.603billion from N364.306billion in H1’22, up by 85percent. Net Interest Income (NII) of N177.459billion in H1’23 as against N120.848billion in H1’22 represents an increase by 47percent.

GTCO

GTCO also reported Profit Before Tax (PBT) of N327.4billion, representing an increase of 217.1percent over N103.2billion recorded in the corresponding period ended June 2022. Likewise, Profit After Tax (PAT) of N280.482billion in H1’23 from N77.557billion in H1’22 represents an increase by 262percent.

The Group’s loan book (net) increased by 22.8percent from N1.89trillion recorded as at December 2022 to N2.32trillion in June 2023, while deposit liabilities grew by 37percent from N4.61trillion in December 2022 to N6.32trillion in June 2023. The Group’s balance sheet remained well structured and resilient with total assets and shareholders’ funds closing at N8.5trillion and N1.2 trillion, respectively.

Full Impact Capital Adequacy Ratio (CAR) remained very strong, closing at 24.7percent, while asset quality was sustained as IFRS 9 Stage 3 Loans improved to 4.6percent in June 2023 from 5.2percent December 2022, however, Cost of Risk (COR) closed at 3.7percent from 0.6percent in December 2022 owing to worsening macros which caused significant increase in ECL variables.

Overall, the Group continues to post one of the best metrics in the Nigerian Financial Services industry in terms of key financial ratios – that is, Pre-Tax Return on Equity (ROAE) of 61.4percent, Pre-Tax Return on Assets (ROAA) of 8.8percent, Full Impact Capital Adequacy Ratio (CAR) of 24.7percent and Cost to Income ratio of 27.7percent.

GTCO is a leading financial services group with banking operations in Nigeria, West Africa, East Africa, United Kingdom alongside new businesses in Payment, Funds Management and Pension Fund Administration.

Its leadership in the banking industry and efforts at empowering people and communities has earned it many prestigious awards over the years. Recently, Guaranty Trust Bank was recognised as Nigeria’s Best Bank and Best Bank in CSR at the 2023 Euromoney Awards for Excellence, Best Banking Group in Nigeria by World Finance, and Best Bank in Nigeria by Global Finance. GTCO’s Guaranty Trust Bank is featured in the Top 1000 Banks in the World and Top 100 Banks in Africa rankings by The Banker

Read also: GTCO grows H1 pre-tax profit by 217.1% to N327.4bn

CEO speaks on the half year results

Segun Agbaje, Group Chief Executive Officer, Guaranty Trust Holding Company Plc said, “Our half year audited results reflect the strong business fundamentals underpinning the GTCO franchise, the quality of our past decisions in future proofing our balance sheet for challenging times, and the sound practices that guide our day-to-day operations.”

He said, “Despite the challenges in the business environment, notably inflationary pressures and exchange rate fluctuations, we are starting to see the gains in the transformation of our businesses following our transition to a Holding Company structure. Improved profitability and a solid performance across key metrics reflect efficiencies and justify the investments we continue to make in technology, product development, and our people.”

He further said; “We recognise the impact prevailing economic and market conditions have on people and livelihoods and we remain committed to seeking better outcomes for our customers by ensuring that our products and service offerings support our customers and their businesses through their evolving realities, whilst also taking every opportunity to optimise stakeholder value.”
Stock trades at 52- week high

GTCO which traded at N40.50 per share on Monday September 4, 2023 has risen this year by 76.1percent. It nears its 52-week high of N41.8 as against a 52-week low of N16.8.

Last 7 Days Trades

Proposed dividend

GTCO announced an interim dividend in the sum of 50 kobo per ordinary share of 50 kobo. The interim dividend which is subject to the deduction of appropriate withholding tax, will be paid to shareholders whose names appear in the Register of Members as at September 14, 2023, for ordinary shareholders and on September 5, 2023, for holders of GTCO’s Global Depository Receipts (GDR).

The register of ordinary shareholders will be closed on September 15, 2023, while the register of GDR holders will be closed on September 6, 2023. Qualification date is September 14, 2023 and payment date is on September 25, 2023.

Dividend will be paid electronically to ordinary shareholders whose names appear on the Register of Members as at September 14, 2023, and who have completed the e-dividend registration and mandated the registrar to pay their dividends directly into their bank accounts.

According to the Register of Members as at June 30, 2023, no individual shareholder held more than 5percent of the issued share capital of GTCO except for the following: Stanbic Nominees Nigeria Limited which owns 5,587,006,871 units, representing 18.22percent of the issued share capital of GTCO. Stanbic Nominees Nigeria Limited (Stanbic) held 18.22percent of the Company’s shares largely in trading accounts on behalf of various investors. Stanbic does not exercise personal voting rights on the said shares.

Read also: GTCO’s FX internet banking spoils black market business

Analysts favour BUY, HOLD…

Olumide Sole, analyst at Lagos-based Vetiva in September 5 note to investors rated GTCO stock a BUY, saying that their target price (TP) for the stock is N48 per share as against N40.50 it closed on Monday September 4.

“Based on our new projections, we have an expected earnings per share (EPS) of N20.76 per share (Previous: N10.28). We also raised our dividend projection to N4.50 per share (Previous: N4.20), following an interim dividend declaration of N0.50/share. All in, we revise our 12-month Target Price (TP) to N48 (Previous: N46). GTCO is currently trading at a P/B ratio of 1.01x vs. Tier I averages of 0.5x. The stock has gained 76percent year-to-date (YtD) and is trading at a 19percent discount to our TP,” the Vetiva analysts added.

In their stock recommendations for this week, United Capital analysts asked investors to HOLD the shares of GTCO saying that their full year target price for the stock is N 41. Meristem analysts in their valuation for GTCO asked investors to hold the stock.

Also, CardinalStone analysts who in their earnings update noted that material FX revaluation gains buoyed GTCO earnings rated the stock a BUY with target price at N43.71.

Likewise, Futureview research analysts asked investors to buy the shares of GTCO saying their target price for the stock is N42.60. Futureview analysts BUY rating for GTCO is premised on their expectation that over the next 12 months, the stock will return at least 10percent above the current market price.

Corporate governance

GTCO said it remains committed to its founding values which endeared the brand to millions of people across Africa and beyond, and which continues to drive financial success. As a Proudly African and Truly International brand, the Company said it will continue to live by these values—of excellence, hard work and integrity, even as it creates faster, cheaper, safer and more diverse products for people and businesses of varied types and sizes. As a Company, GTCO recognise that adherence to the best corporate governance standard ensures and contributes to the long-term success of a company. In the light of this recognition, GTCO said it continuously ensure its operations create and deliver sustainable value to shareholders and achieve continuous corporate success.

“We believe good corporate governance practices enhance the confidence placed in the Company by our shareholders, customers, business partners, employees, the financial markets in which we operate and all stakeholders. The Group is governed under interrelated corporate governance frameworks that enable the Board of the Company to discharge its oversight functions, provide strategic direction to the Group, take decisions and ensure regulatory compliance. The subsidiaries continue to comply with the statutory and regulatory requirements of their regulators,” GTCO noted in its half year financials.