Amid the global economic turbulence caused by the coronavirus pandemic, Guaranty Trust Bank (Gtbank) has sweated its asset to generate more returns more than any other lender in Nigeria.
What this means is that the largest lender by market value has used or deployed the resources of its owners in generating higher profit, and it has consistently been turning top line impressive performance into bottom linr growth.
For instance, Gtbank has a return on average equity (ROAE) of 29.70 percent as at March 2020, and what this means is that every Naira of common shareholder’s equity earned about N29.70 so far. In other words, shareholders saw 29.70 percent return on their investment.
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Its peer rivals are only playing the catch up game. Zenith Bank has a ROAE of 21.64 percent, Accessbank, (26.28 percent); Firstbank Holdings, (13.80 percent), Stanbic IBTC Holdings, (26.45 percent), and United Band for Africa, 19.89 percent.
The small and midsized banks, hobbled by deteriorating assets quality, have not been generating much return to shareholders.
Fidelity Bank has a ROAE of 10.54 percent, Sterling Bank, (7.03 percent); Union Bank, (9.55 percent), and First City Monument Bank, (9.30 percent).
Gtbank’s market cap has grown steadily higher than equity value, which indicates increased confidence on the part of investors.
The lender has a price to earnings ratio of 3.21 times earnings, which makes it shares attractive amid an economic downturn brought on by the coronavirus induced lockdown.
A dividend yield of 12.44 percent means shareholders will be generously compensated for investing in the shares of Gtbank.
Analysts say it is easier for a camel to go through the eye of a needle than for banks to deliver higher returns in the future as the coronavirus induced lockdown has paralyzed economic activities.
Banks also face pressure from accumulated loan loss provision and weak loan book on the back of lower oil price, and lackluster consumer demand is expected to weigh on demand for credit.
Interest income and similar charges for the 1o largest banks increased by a mere 4.97 percent as at March 2020, from N700.94 billion last year, according to data gathered by Businessday.
As a result of the lockdown measures imposed by governments to curb the spread of the virus, oil demand dwindled by more than 60 percent as Brent crude, the international marker, plunged to an 18- year low below $20 a barrel last month. On Friday, Brent rose more than 3 percent to above $30.
The International Monetary Fund says Nigeria’s economy is expected to shrink by 3.4 percent this year and Africa’s largest economy could face a recession lasting until 2021.
