Company Analysis

GTBank: At 47.51% LDR, Time For More Asset Creation To Match Regulatory Threshold

Rating: Hold

Current Market Price: N35.80

Loan to Deposit Ratio: 47.51%

Year High: N38.45

Year Low: N 16.70

Fair Value: N36.02

Equity Analyst: Tunde Segun Jeariogbe

Key Financial Ratios

  • This report observes the nine-month financial performance indices of Guaranty Trust Bank for the period ended 30th November, 2020, compare same with figures released in the corresponding period of 2019, and established growth and performance ratings.
  • Please note that the current value of the company under review on the Nigerian Stock Exchange is in agreement with our intrinsic value for both the first and second quarters of the year. Nevertheless, we have maintained our valuation units and arrived at a value not far from the current market value.
  • Please observe that Operating Expenses is without Depreciation and Amortisation, in our opinion, this avails us the opportunity to see the true expenses needed for the valuation since they are both non-cash expense.
  • Generally, the result was a marginal growth when placed side-by-side that of the corresponding quarter of 2019. See below for detailed information:
GUARANTY
BourseNigerian Stock Exchange
Code NameGUARANTY
SectorFINANCIAL SERVICES
Market ClassificationMain Board
Nature of BusinessCommercial Banking
Date of IncorporationJuly 20th 1990
Date ListedSeptember 9th 1996
End of Accounting Year31st December
Websitewww.gtbank.com
RegistrarDatamax Registrars Limited
AuditorPricewaterhouseCoopers
Share Price@Relsd (N)                                                       37.00
Earnings per Share                                                         4.83
Intrinsic Value(N)                                                       36.02
Share Outstanding29,431,179,224
Market Capitalisation                                  1,088,953,631,288

Company Figures

  • We have estimated Guaranty Trust Bank Gross Earnings for the period at N310.96 billion, as 1.71% below that of the 2019 third quarter.
  • Interest Income stood at N224.37 billion, same as 0.09% above the 224.18 billion posted in its 2019 third quarter numbers.
  • Interest Expenses is valued at N38.49 billion, versus N51.25 billion in the comparable period of 2019.
  • Thus, Net Interest Income is estimated at N185.88 billion, higher than the N172.93 billion in the similar period of 2019.
  • Operating Expenses inched by marginal 8.35% to N88.79 billion, compared to N81.94 billion at the end of 2019 third quarter.
  • Profit before Tax therefore stood at N167.35 billion, as against the previous N170.65 billion.
  • Having made provision for Tax Expenses for the period, the management of Guaranty Trust Bank reported N142.28 billion as profit during the nine-month period, a marginal growth when compared to N146.98 billion in the similar period of last year.
GUARANTY
Statement of Comprehensive Income
 20202019%CHG
GROSS EARNINGS               310,966,469,000           316,389,814,0001.71
INTEREST INCOME               224,378,599,000           224,187,563,0000.09
INTEREST EXPENSES                 38,490,373,000              51,250,451,00024.90
NET INTEREST INCOME               185,888,226,000           172,937,112,0007.49
OPEX                 88,791,920,000              81,947,368,0008.35
DEPRECIATION                 21,571,368,000              15,519,528,00039.00
AMORTISATION                    2,037,634,000                2,131,977,0004.43
PBT               167,351,699,000           170,651,542,0001.93
TAX                 25,068,363,000              23,661,833,0005.94
PAT               142,283,336,000           146,989,709,0003.20
TOTAL COMP INCOME               150,801,210,000           142,742,920,0005.65
Statement of Financial Position
Total Assets           4,573,677,041,000        3,519,426,639,00029.96
Total Liabilities           3,818,128,205,000        2,882,674,411,00032.45
Net Assets               755,548,836,000           636,752,228,00018.66
Property Plan & Equipment               146,351,701,000           136,161,813,0007.48
Retained Earnings               147,013,866,000           157,076,209,0006.41
Total Deposits           3,302,919,737,000        2,552,188,317,00029.42
Total Loans and Advances           1,569,148,608,000        1,378,001,601,00013.87
  • Guaranty Trust Bank’s Total Assets is currently valued at N4.57 trillion, 29.96% higher than the N3.51 trillion estimated in the 2019 third-quarter.
  • Total Liability (all Deposits inclusive) is estimated at N3.81 trillion, 32.45% above the N2.88 trillion posted in its 2019 third quarter result.
  • Net Assets therefore improved by 18.66% to N755.54 billion, as against N636.75 billion in the corresponding nine-month.
  • Retained Earnings is now N147.01 billion, a 6.41% drop from the 2019 third-quarter numbers.
  • Total Deposit achieved through the quarter is valued at N3.30 trillion, as against N2.55 trillion in 2019
  • Total Loans and Advances through the period is put at N1.56 trillion, representing 29.42% above 2019 figure.
  • See above table for details

Volatility Ratios

  • Debt Ratio, which compares Liabilities and Assets, showed that currently Liability is below Asset Valuation, thus the amount stated as Liabilities is same as N83.48% of the bank’s Assets. Please understand that the high ratio is typical of financial institution since they are known to collect deposits and sometimes take up loans to meeting borrowers’ demands.
  • Confirming the above scenario, we estimated that Total Debt can replicate Equity 5.05 times, which means the bank used more debts to service its assets through the period under review.
  • We concluded that the equity is 16.52% of the bank’s Assets, lower than the 18.09% Equity Ratio estimated at the end of the 2019 nine-month period.
  • Guaranty Trust Bank’s estimated beta value confirmed the improved liquidity status, since it is above unity, though it stemmed below the industrial average as at the time this report was compiled.
  • See below table for details.
Financial Strength/Solvency Ratio
TICKERS20202019%CHG
Debt Ratio83.48%81.91%1.92
Total Debt to Equity Ratio (MRQ)505.34%452.72%11.63
Equity Ratio16.52%18.09%8.69
Beta Value                                       1.33                                   1.1119.82

Profitability Ratios

  • Pre-Tax Margin is valued at 53.82%, same as 0.22% below the previous 53.94% estimate.
  • Effective Tax Rate is valued at 14.98%, a stable position when compared to the 13.87% in the corresponding period.
  • Interest Expense is same as 12.38% of the Gross Earnings for the period, which is a lower & better performance when compared to the 16.20% in the similar period of 2019.
  • Return achieved on Average Equity is approximately valued at 18.83% versus 23.08% in the comparable period.
  • See the table below for details:
PROFITABILITY RATIOS
TICKERS20202019%CHG
PRE-TAX MARGIN53.82%53.94%0.22
EFFECTIVE TAX RATE14.98%13.87%8.03
IE TO GE12.38%16.20%23.59
ROAE18.83%23.08%18.42
ROAA3.11%4.18%25.51

Efficiency Ratio

  • Measuring management’s efficiency, we tested and observed that Operating Expenses (without depreciation and amortisation) is same as 28.55% of the Gross Earnings, a 10.24% growth over the 25.90% achieved in the corresponding period.
  • We also established that Gross Earnings is only 6.80% of the Total Assets, a drop in management’s efficiency by 24.37%.
  • Although the Central Bank of Nigeria (CBN), the banking industry’s primary regulator, mandated a 65% Loan to Debt Ratio (LDR), the management of Guaranty Trust Bank achieved only 47.51% LDR through the quarter versus 53.99% in 2019.
  • See below for other observed efficiency ratios
EFFICIENCY RATIOS
TICKERS20202019 
OPEX TO GE28.55%25.90%10.24
GE TO TA6.80%8.99%24.37
LDR47.51%53.99%12.01

Investment Ratios***

  • At the end of the quarter under review, the management of Guaranty Trust Bank earned N4.83 per unit of its listed shares on the floor of the exchange, representing a mild improvement over the corresponding period earnings.
  • Our adjusted P/E-Ratio for third quarter is 2.55x, which is above the 1.80x of 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 13.07% of the current market price, though below the 18.50% yield recorded in the comparable period of 2019
  • Presently, the estimated Book Value of guaranty Trust bank stemmed below our intrinsic value at N25.67 although this is an improvement over N21.64 in 2019 third quarter analysis
  • See the below table for details
GUARANTY
Investment/Valuation Ratios
Tickers20202019%Chg
EPS4.834.993.20
TCIP/SHARE5.124.855.65
P/E-Ratio2.551.8041.57
Earnings Yield13.07%18.50%29.36
BV/Share25.6721.6418.66
PBV1.441.2515.49
LDR47.51%53.99%12.01

Valuation

After carefully exploring our blend of valuation models, we have valued each units of Guaranty Trust Bank Plc at N36.02. Thus, considering its current market price on the bourse at the time this report was concluded, we Rate Guaranty Trust Bank shares a Hold

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