Adesoji Solanke Director for Frontier and subSaharan African banks at Renaissance Capital in a recent note to clients said his equity research firm’s top banking stock is Guaranty Trust Bank (Gtbank).
Renaissance Capital added the pick was predicated by the lender’s high quality of earnings in an environment fraught with difficulty.
On the basis of the historical operational efficiency, balance sheet optimization, sound risk management strategy, robust profitability and dividend consistent, over 90 percent of investment houses have retained Buy ratings on Gtbank.
We have crunched some interesting numbers to validate Solake and his team’s wager on Gtbank.
Superior profit per employees than peer rivals Gtbank, the largest lender by market capitalization in Africa’s largest economy, has deployed its staff in generating higher profit than its peer rival.
What this means is that the lender’s workforce is productive and its workers are getting better education and having better skills that enables them to carry out tasks in an efficient and expeditious manner.
As of the first six months through June, Gtbank, with staff strength of 3,842, recorded profit per employee of N27.07 million. That means each head generated N27.07 million in profit for the organization.
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This compares with Zenith Bank- with workforce of 6,521recorded profit per employee of N15.92 million as at June 2020.
Access, the largest lender by total asset, has a workforce of 5,576 and recorded profit per employee of N10.94 million.
United Bank for Africa (UBA), the pan African lender, has a staff strength of 11,200, but it has profit per employee of N3.96 billion.
Gtbank’s records lowest cost to income ratio amid tough operating environment
Undoubtedly, Gtbank is being run efficiently and its income is rising faster than costs even amid inflationary pressures, currency volatility, regulatory induced cost, Covid- 19 donations, and huge overhead cost as cost to income ratio of 44.80 percent is the lowest in the industry.
Zenith Bank has a cost to income ratio of 53.40 percent; FirstBank Holdings (FBHN), (65.80 percent); Access Bank, (65.80 percent), and United Bank for Africa, (67.20 percent).
Analysts attribute Gtbank’s cost optimization to the deployment of latest technology that executes transactions across branch offices and headquarters.
The largest lender by market capitalization has the lowest wage bills or staff cost of (N18.77 billion) and total cost (staff cost plus other operating expenses) of N82.34 billion.
The chart below shows Access Bank has a total cost of N174.14 billion as cost surged following the acquisition of Diamond Bank. Zenith, (N135.84 billion); FBHN, (N131.17 billion), and UBA (N132.12 billion).
Gtbank delivers higher returns to shareholders
Little wonder Gtbank has the highest return on average equity (ROAE) in the banking industry, which means it is more efficient in utilizing shareholders’ resources in generating higher profit.
It has ROAE of 26 percent as at June 2020, that compares with Zenith Bank’s (23.30 percent), Access Bank, (15.10 percent); UBA, (12.10 percent), FBHN, (11.80 percent).
Gtbank plan to set up a holding company will allow the lender to offer other financial services, which could position it for even stronger growth.
The Lagos-based firm is also splitting its banking division into four separate subsidiaries to oversee Nigeria, West Africa, East Africa and its U.K. unit
