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GTBank: Market sentiment continues to support share pricing

GTBank
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Earlier this month, precisely on Wednesday March 6, 2019, Guaranty Trust Bank Plc (GTBank) released its audited financial statement for the year ended December 31, 2018. Investors had started snapping up the shares of the bank following the impressive financials and proposed final dividend.

The scorecards

Snapshot of the results released to investors at the Nigerian Stock Exchange (NSE) shows the tier 1 lender’s group gross earnings grew by 3.7percent to N434.69billion in 2018, from N419.22billion it recorded in 2017.

GTBank Plc reported 6.2percent decline in Interest Income to N306.96billion from a high of N327.33billion in 2017. Net Interest Income (NII) of N222.43billion against N246.66billion in 2017 represents a decline of 9.8percent.

Loan Loss Expenses stood lower at N4.90billion, a remarkable 59.7percent decline from N12.16billion in 2017. Non-Interest Income grew by 39percent, to N127.73billion from N91.89billion in 2017.

Loans & Advances of N1.262trillion in 2018 represents a decline of 12.9percent, from N1.449trillion in 2017. The bank grew deposits by 9.7percent in 2018 to N2.356trillion from N2.147trillion in 2017.

Cost to Income Ratio (CIR) stood lower at 36.7percent in 2018, from 37.6percent in 2017, down by 0.9percent. Return On Average Equity (ROAE) of 30.9percent against 30percent in 2017, represents an increase of 0.9percent.

GTBank reported profit before income tax (PBT) increase by 9.1percent to N215.58billion, from a low of N197.68billion in 2017; while after tax profit for the year increased by 10 percent to N184.63billion from a low of N167.91billion in 2017.

The bank closed the 2018 financial year with Total Assets of N3.287trillion and Shareholders’ Funds of N575.6billion. In terms of Assets quality, non-performing loan (NPL) ratio and Cost of Risk improved to 7.3percent and 0.3percent in December 2018 from 7.7percent and 0.8percent in December 2017 respectively.

In addition, coverage ratio for NPL stood at 105.1percent and Capital adequacy ratio remained very strong, closing at 23.4percent despite the implementation of IFRS 9.

Returns to shareholders

GTBank has continued to report impressive financial ratios in terms of profitability, efficiency and capital for a Financial Institution in Nigeria as revealed by its return on equity (ROAE) of 30.9percent, cost to income ratio of 37.1percent and capital adequacy of 23.4percent. These ratios are a testament to the efficient management of the bank.

GTBank Plc earnings per share (EPS) increased to 654kobo from 594kobo in 2017.  During the 2018 financial year, the directors declared and paid an interim dividend of 30kobo per ordinary share on the issued capital of 29,431,179,224 Ordinary Shares of 50 Kobo each, for the half-year (H1) period ended June 30, 2018.

The directors recommend the payment of a final dividend of N2.45kobo (only) per ordinary share of 50kobo (bringing the total dividend for the financial year ended December 31, 2018 to N2.75kobo (2017: N2.70kobo per share).

Stock trading information

At the equities market, price list of stocks as at March 8, 2019 shows GTBank shares at N37.30; indicating the stock has gained 8.3percent year-to-date (ytd). The stock had reached a 52-week high of N48.50 and a 52-week low of N30.90. With shares outstanding of 29,431,179,224 units, GTBank market capitalisation is in excess of N1.097trillion.

Analysts’ comment

Vetiva Capital Research analysts who are reviewing their target price for GTBank Plc as noted in their March 7 commentary said the bank overcompensated for the lag in core banking activities with a surge in non-interest income of 39 percent year-on-year. In summary, the analysts view the bank’s performance as impressive “but not superlative given the slight reduction in net interest margins full year 2018 (9.2percent) against 2017 (10.4percent).

“We expect reduced industry margins in fees and commissions and other non-interest income lines in the medium to long term from peer competition via reduced rates and other transaction incentives. Our rating is currently under review,” according to Vetiva research analysts.

“Looking ahead, we expect the bank to renew its appetite to expand risk asset in a bid to drive interest income. Again, we anticipate a lower yield environment going forward, hence, we do not expect the bank to be as bullish on government instrument as observed in recent time”, United Capital research analysts said in their March 11 earnings update following GTBank Plc scorecards for 2018.

Accordingly, the analysts retained their stable outlook for Guaranty Trust Bank Plc. “We expect market sentiment to continue to support pricing over the short to medium amid increasing stability in the polity as well as the broader economy. Consequently, we retain our target price (TP) of N46.7 per share, a 25.2percent premium to the current price of N37.3/share. Hence, we maintain our BUY rating on GUARANTY,” United Capital research analysts added.

Management’s comment

Segun Agbaje, Managing Director/CEO of Guaranty Trust Bank Plc, said, “In 2018, our focus on staying nimble, strengthening customer relationships and driving our digital-first strategy paid off. We successfully navigated the pressures of our challenging and radically changing business environment, recorded growth across key financial indices and reaffirmed our position as one of the best performing and well managed financial institutions in Africa”.

“This result reflects, not just the fundamental strength of our brand, but also our commitment to our values of excellence, creating value for all stakeholders and putting our customers first in everything that we do. Driven by these values, we are building the bank of the future by pairing the best of our business with the massive potential of digital technologies to create Africa’s first integrated and trusted platform; Habari”, Agbaje added.

 

Iheanyi Nwachukwu

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