*Coy:* **Guaranty Trust Bank Plc**

*Rating:* **Hold**

*Current Market Price:* **N37.00**

*NPL Ratio:* **6.10%**

*Year High:* **N57.00**

*Year Low:* **N 31.95**

*Fair Value:* **N40.50**

*By:* **Jeariogbe Tunde Segun (Equity Analyst)**

**Key Financial Ratios**

• This report observes the nine-month financial performance of Guaranty Trust Bank Plc for the period ended September 30, 2018, and compares same with figures in similar period of 2017

• As noted in the summary above Non performing loan ratio at the close of third quarter business activities is 6.10%

• Comparing the statistics with those of 2017 established that key performance ratios marginally improved.

**Company Figures**

• Gross earnings for the period at N337.26 billion only improved by 8.83% above the N309.91 billion reported in 2017Q3.

• Interest Income stood at 4.32% below the 2017 figure. Current Interest Income is N237.54 billion; lower than N248.27 billion posted in 2017 nine months result.

• Interest Expenses grew by 13.97%, from N309.91 billion to N337.26 billion.

• Profit before Tax reported stood at N164.24 billion, 9.47% above the N150.03 of 2017.

• Having considered other costs, including tax expense, N14.22billion was reported as the Profit for the period, which is 13.26% above what was reported in corresponding quarter of 2017.

• Total comprehensive income improved by 9.47% to N140.20 billion, as against N128.21 billion in the previous third quarter.

• Total Assets was estimated at N3.433 trillion, same as 6.86% above the N3.212 trillion of the previous nine months.

• Total Liabilities is currently N2.898 trillion, which is 10.18% above the N2.631 trillion reported in corresponding quarter of 2017.

• Total Deposit through the nine months currently reported is estimated at N2.335 trillion, this is 18.49% above the N1.970 trillion achieved in the first nine months of 2017.

• Meanwhile, Loans and Advances were curtailed by 11.06%. According to the report a total of N1.27 trillion was given out as loans and advances through the period, below the N1.428 trillion of 2017.

• Nevertheless, Net Assets dropped by 8.18% when compared to the reported figure in similar period of 2017.

• **Kindly see the table below for more.**

**Volatility Ratios**

• Although the estimated Beta value for Guaranty Trust Bank shares fell below industry average, it is well above the market Beta, signifying the stock’s its liquidity and patronage by the investing public.

• Although almost irrelevant since we analyze a financial institution whose major business is deposit mobilisation (mostly reported under liability), we estimate Debt-to-Equity ratio as 64.26%, well above the industrial average of 64.44%

**Profitability Ratios**

• Interest Expense to Gross Earnings is presently estimated at 19.84%. This is 4.72% higher than the 18.94% estimated in the 2017 half year.

• PBT margin stood at 48.70% as against 48.41% last year. This is a 0.59% improvement.

• Similarly, Profit margin looks fairly up against last year. We have estimated 42.17% margin from Gross Earnings as against the previous estimate of 40.52%.

• Return on Average Equity is now 26.62%, compared to the 21.58% achieved in the first nine months of 2017.

• Return on Average Assets only differs marginally by 5.99%, moving from 3.91% to 4.14%.

**Efficiency Ratio**

• Gross Earnings to Total Assets is estimated at 9.82%, which is only 1.85% above the estimate in 2017.

• Similarly, Gross Earnings to Equity is now 63.12%, as against the 53.26% estimated from the 2017 nine-month financial statistics.

• Financial Leverage is 6.34x, as against 5.52x. This is an estimate of the number of times the total assets replicates the equity (In other words, the ratio has continued to improve).

• It was also established that 54.39% of the Total Deposit was given out as Loan and Advances during the period under review, which is 24.94% lower than the 72.47% reported during the first nine months of 2017.

• Meanwhile, Loan and Advances is same as 37.00% of the Total Assets, this is 16.76% lower than the 44.45% of last half year, and shows a controlled/reduced risk when compared to 2017.

**Investment Ratios**

• Just as in the company report above, since shares outstanding remained constant during the two periods under consideration, the estimated amount earned per units of Guaranty Trust Bank is N4.83. This is 13.26% above the N4.27 earned last year.

• The Total Comprehensive Income per share for the period is N4.76 as against the previous N4.3, a 17.74% difference.

• The said Earnings Per Share yielded 13.19% of the current market price on the day the result was made available to the investing public. This is a better yield when compared to the 10.23% achieved last Q3

• P/E Ratio for the period is 2.53x, as against 3.26x estimated last year.

• As we speak the Book Value of Guaranty Trust Bank is N18.15, fairly the same as the N19.77 of last year. Should we choose to value this equity with this indices, we shall conclude an overpriced position of each of its shares on the floor of the exchange.

• Opex Margin was grew by marginal 3.80% having moved to 26.49% from 25.52%.

**Valuation**

After carefully exploring our blend of valuation models, we have valued each units of Guaranty Trust Bank Plc at N40.50. Thus, considering the current market price of N37.00 (as at the time this report was concluded), we Rate Guaranty Trust Bank shares a **Hold**.