GTBank 2020H1: Time To Grow Earnings, Boost Loan Book, Enhance Profit Further

Rating: Long Term: Buy+++ Short Term: Buy

Current Market Price: N25.65


Loan to Deposit Ratio: 52.63%

Year High: N34.40

Year Low: N 16.70

Fair Value: N35.84

Equity Analyst: Tunde Segun Jeariogbe

Key Financial Ratios

  • This report observed the half-year performance indices of Guaranty Trust Bank for the period ended 30thJune, 2020, compared same with figures released in the corresponding period of 2019, to establish growth and enable appropriate rating.
  • We maintained the full-year projections with full-year numbers, while performing our valuation of Guaranty Trust Bank, following which intrinsic value remained high, despite the drop in its share price on the Nigerian Stock Exchange (NSE).
  • Note that Operating Expenses in this analysis is less Depreciation and Amortisation. This, in our opinion, avails us the opportunity to see the true nature of expenses needed for valuation since the two major non-cash expenses have been removed.
  • At the end of the period, the management of Guaranty Trust Bank posted a marginally lower profit. That notwithstanding, the lower performance was compensated for in the Total Comprehensive Income due to the positive figure from the Net change in fair value of other financial assets.
  • See below for detailed information:
BourseNigerian Stock Exchange
Market ClassificationMAIN BOARD
Nature of BusinessCommercial Banking
Date of IncorporationJuly 20th 1990
Date ListedSeptember 9th 1996
End of Accounting Year31st December
RegistrarDatamax Registrars Limited
Share Price@Relsd (N)                                                       25.65
Earnings per Share                                                         3.20
Intrinsic Value(N)                                                       35.84
Share Outstanding29,431,179,226
Market Capitalisation                                     754,909,747,147
Source: NSE, Company Report and Investdata Research

Dividend Ratios

  • Despite the marginal growth and tough business environment, further heightened by the novel coronavirus (COVID-19) pandemic, the management of Guaranty Trust Bank retained interim dividend payout of 30 kobo, same as was paid in the corresponding period of 2019.
  • The said dividend is same as 9.37% of the profit realised through the six months.
  • Nevertheless, the dividend is 1.17% yield of the share price of Guaranty Trust Bank as of when the result was released.
  • The qualification date for the said interim dividend is 15th September, 2020 while the payment date is 21st September, 2020.
  • See the table below for details.
Latest Final Dividend                                       2.50                                   2.452.04
Latest Interim Dividend0.300.300.00
Interim Dividend Pay-Out Ratio9.37%8.91%5.16
Final Dividend Pay-Out Ratio37.38%39.04%-4.25
Interim Dividend Yield1.17%1.15%1.36
Final Dividend Yield11.01%6.46%70.59
Source: NSE, Company Report and Investdata Research

Company Figures

  • According to the scorecard, Gross Earnings at the end of the period stood at N225.13 billion, 1.48% more than the N221.86 billion reported in the corresponding period of last year.
  • Interest Income is stated as N150.48 billion, same as 2.76% above the N146.44 billion posted in the 2019 first half.
  • Interest Expenses is valued at N26.09 billion, versus N32.62 billion in the comparable period of 2019.
  • Thus, Net Interest Income is estimated at N124.39 billion, higher than the N113.82 billion in the similar period of 2019.
  • Operating Expenses grew by marginal 17.76% to N68.32 billion, compared to N50.01 billion at the end of the 2019 half-year period.
  • Profit before Tax therefore stood at N109.71 billion, as against N115.78 billion in the corresponding half-year.
  • Having removed Tax Expenses due for the period, the management of GTBank reported N94.27 billion as profit in the first six months of 2020, representing 4.90% below the N99.13 billion in the similar period in 2019.
  • Note also that the Total Comprehensive Income is currently estimated at N107.23 billion, same as 7.05% above the N100.17 in the corresponding period.
Statement of Comprehensive Income
GROSS EARNINGS               225,138           221,8691.47
INTEREST INCOME               150,486           146,4482.76
INTEREST EXPENSES                 26,09332,62720.03
NET INTEREST INCOME               124,393           113,8219.29
OPEX                 68,324              58,01817.76
DEPRECIATION                 14,024            10,62232.02
PBT               109,713           115,7875.25
TAX        15,442              16,6547.27
PAT                 94,271              99,1334.90
TOTAL COMP INCOME               107,235           100,1727.05
Statement of Financial Position
Total Assets           4,511,323        3,598,11225.38
Total Liabilities           3,790,389        2,995,10126.55
Net Assets               720,933           603,01019.56
Property Plan & Equipment               149,558           131,36313.85
Retained Earnings               115,959           128,2139.56
Total Deposits         3,086,267        2,552,09420.93
Total Loans and Advances           1,624,226        1,274,44327.45
Source: NSE, Company Report and Investdata Research
  • Guaranty Trust Bank Total Assets is currently valued at N4.51 trillion, which is 25.38% higher than the N3.59 trillion estimated at the end of 2019 second quarter business.
  • Total Liability (all Deposits inclusive) is estimated at N3.79 trillion, 26.55% above the N2.99 trillion posted in its 2019 second quarter result.
  • Net Assets therefore improved by 19.56% to N720.93 billion versus N603.01 billion in the corresponding quarter.
  • Retained Earnings is now valued at N115.95 billion, this is a 9.56% drop from the 2019 second quarter numbers.
  • Total Deposit achieved through the quarter is valued at N3.08 trillion, as against N2.55 trillion posted in 2019.
  • And, Total Loans and Advances through the six months is N1.62 trillion, representing 27.45% above the 2019 figure.
  • See the above table for details.

Volatility Ratios

  • At the end of the period, the Debt Ratio is estimated at 84.02%, a marginal improvement above the 83.24% estimated from the corresponding period’s numbers
  • Thus, Total Debt is estimated at 525.76% of the Equity Value at the end of the period, which is 5.85% above the 496.69% in the corresponding period. Please note that the high rate reveals the use of more debt (especially deposits) through the period, to service the bank’s assets.
  • Establishing the level of investor confidence in the bank is its Equity Ratio which compares Equity to Assets. We conclude that the equity is only 15.98% of the bank’s Total Assets, a reduced position to the 16.76% in the corresponding period.
  • Guaranty Trust Bank’s estimated beta value confirms its liquid status, being above unity, despite stemming below the industry average as of the time this report was compiled.
  • Although we may not be totally accurate, we have estimated the Non-Performing Loan Ratio of Guaranty Trust Bank at 6.80%, up from 6.53% in the corresponding period of 2019.
  • See the table below for details.
Financial Strength/Solvency Ratio
Debt Ratio84.02%83.24%0.94
Total Debt to Equity Ratio (MRQ)525.76%496.69%5.85
Equity Ratio15.98%16.76%4.65
Beta Value                                       1.10                                   1.154.35
Non Performing Loan Ratio6.80%6.53%4.13
Source: NSE, Company Report and Investdata Research

Profitability Ratios

  • Pre-Tax Margin is valued at 68.34%, same as 7.46% up from the previous estimate of 63.60%.
  • Interest Expense is same as 11.59% of the Gross Earnings for the period, this is a lower performance when compared to the 14.71% in the similar period of 2019.
  • Returns achieved on Average Equity is approximately stood at 13.08%, versus 16.44% in the comparable period.
  • See the table below for details.
PRE-TAX MARGIN48.73%52.19%6.62
EFFECTIVE TAX RATE14.08%14.38%2.14
IE TO GE11.59%14.71%21.19
Source: NSE, Company Report and Investdata Research

Efficiency Ratio

  • Measuring management’s efficiency, we tested and observed that Operating Expenses (without depreciation and amortisation) is same as 30.35% of the Gross Earnings, a drop in management’s efficiency when compared to the 26.15% achieved in the corresponding period of last year.
  • We also established that Gross Earnings is only 4.99% of the Total Assets, indicating a 19.07% decline in management efficiency, when compared to the 6.17% achieved at the end of 2019 half-year.
  • Although the regulatory body mandated a 65% Loan to Debt Ratio (LDR), the management of Guaranty Trust Bank achieved only 52.63% LDR through the quarter, versus 49.94% in 2019.
  • See below for other observed efficiency ratios.
OPEX TO GE30.35%26.15%16.05
GE TO TA4.99%6.17%19.07
Capex/Share                                       1.09                                   1.2210.39
Source: NSE, Company Report and Investdata Research

Investment Ratios

  • At the end of the quarter, the management of Guaranty Trust Bank earned N3.20 per unit of its listed shares on the floor of the exchange, this is a mild improvement over the corresponding period earnings.
  • Total Comprehensive Income Per share is estimated at N3.64 as against the N3.40 in the corresponding period. Observed that this had complimented the down position in the profit line
  • Our adjusted P/E-Ratio for second quarter is 2.00x. higher than the 1.93x in the corresponding period of last year.
  • Meanwhile, confirming the attractiveness of Guaranty Trust Bank at the moment is the fact that the said earnings yielded 12.49% of the current market price, above the 12.96% yield recorded in the comparable period of 2019.
  • Presently, the estimated Book Value of Guaranty Trust Bank stemmed below our intrinsic value at N24.50, although this is an improvement over the N20.49 in the corresponding period of last year.
  • Nevertheless, going by the book value as against the current market price, we can conclude that Guaranty Trust Bank is at the moment over-valued on the Nigerian Stock Exchange, given our estimated price-to-Book Value ratio at above unity.
  • See the table below for details.
Investment/Valuation Ratios
Earnings Yield12.49%12.96%3.61
Source: NSE, Company Report and Investdata Research


After carefully exploring our blend of valuation models, we have valued each units of Guaranty Trust Bank Plc at N35.84. Thus, considering the current market price, the bank as of the time of concluding this report is rated a Strong Buy.