Company Analysis

GTBank: Profit Margin Stays Strong, Needs To Grow LDR

Rating: Strong Buy

Current Market Price: N29.80

Loan to Deposit Ratio: 46.05%

Year High: N36.00

Year Low: N 27.85

Fair Value: N39.69

Key Financial Ratios

  • This report observed the full-year performance indices of Guaranty Trust Bank for the period ended 31st December 2020, compared same with those released in the corresponding year (2019), to establish growth and performance ratings.
  • Note that the current value of GTBank’s share price on the exchange is a slight improvement on our intrinsic value for the third quarter.
  • Note also that Operating Expenses here is less Depreciation and Amortisation, which in our opinion avails us the opportunity to see the true expenses needed for valuation since they are both noncash expenses.
  • Generally, the result was a marginal growth when placed side-by-side that of the corresponding year 2019. See below for detailed information:
Sources: Company Financials, NSE, Investdata Research

Dividend Details

  • At the end of 2020 full-year, the bank’s board announced a final cash dividend of N2.70 per share, an improvement over the previous N2.50 payout.
  • The final dividend is in addition to the 30 kobo paid as an interim dividend at half-year, bringing the total payout to N3.00 each.
  • Estimates reveal that the said final dividend represents 39.45% of total earnings, fairly in agreement with the 37.38% payout ratio of 2019.
  • As of the time the result was released, the dividend amounted to 9.06% of the total value of GTBank’s shares on the exchange, which we believe is a better yield when compared to most fixed income investment instruments.
  • The closure date for the said dividend is 1st April 2021, following which the qualification date is 31st March 2021, while the investors’ account will be credited on 9th April 2021.
Sources: Company Financials, NSE, Investdata Research

Company Figures

  • GTBank’s Gross Earnings for the full-year 2020 stood at N455.22 billion, 4.58% above the 2019 full-year estimate.
  • Interest Income stood at N300.73 billion, same as 1.53% above the N296.20 billion posted in its 2019 financial year.
  • Interest Expenses is valued at N47.06 billion, versus N64.84 billion in the comparable year of 2019.
  • Thus, Net Interest Income is estimated at N253.66 billion, better than the N231.36 billion in the corresponding year.
  • Operating Expenses inched by a marginal 9.53% to N116.28 billion, compared to N106.16 billion at the end of 2019 full-year. We expected this to drop below this, given the bank’s branch opening interchange strategy.
  • Profit before Tax, therefore, stood at N238.09 billion, as against N231.70 billion in the corresponding year.
  • Having removed the Tax Expenses due for the period, the management of GTBank reported N201.43 billion as the profit made in the full year 2020 business session, compared to N196.84 billion in 2019.
Sources: Company Financials, NSE, Investdata Research
  • Guaranty Trust Bank Total Assets is currently valued at N4.94 trillion, this is 31.54% higher than the N3.75 trillion estimated at the end of 2019 full year business
  • Total Liability (all Deposits inclusive) is estimated at N4.13 trillion, 34.47% above the N3.07 trillion posted in its 2019 full year numbers
  • Net Assets therefore improved by 18.49% to stand at N814.39 billion versus N687.33 billion in the corresponding year
  • Retained Earnings is now N193.92 billion, this is 62.62% growth above the 2019 full year numbers
  • Total Deposit achieved through the year is valued at N3.61 trillion, as against N2.64 trillion posted in 2019
  • And, Total Loans and Advances through the twelve months is put at N1.66 trillion, this is 36.77% above the 2019 loan and advances.
  • See above table for details

Volatility Ratios

  • Debt Ratio, which compares Liabilities to Assets, showed that currently Liability is below Asset Valuation, thus the amount stated as Liabilities is same as 83.53% of the bank’s Assets. Please understand that the high ratio is typical of financial institutions, given their kind of business- mobilising deposits and sometimes would obtain loans to meeting borrowers’ demands.
  • Confirming the above scenario, we estimated that the Total Debt can replicate Equity 5.07x, which shows that the bank used more debts to service its assets in the period under review.
  • We concluded that the equity is 16.47% of the bank’s Assets, lower than the 18.29% Equity Ratio estimated at the end of 2019.
  • GTBank’s estimated beta value confirmed a more liquid status, though it stemmed below the industrial average as of the time this report was compiled.
  • See the table below for details:
Sources: Company Financials, NSE, Investdata Research

Profitability Ratios

  • Pre-Tax Margin is valued at 52.30%, same as 1.74% below the previous estimate of 53.23%.
  • Effective Tax Rate is valued at 15.40%, a stable position when compared to the 15.04% in the previous year.
  • Interest Expense is same as 10.34% of the Gross Earnings through the year, a lower and better performance, when compared to the 14.90% recorded in the prior full-year.
  • Return achieved on Average Equity is approximated at 24.73%, versus 28.64% in the comparable year.
  • See the table below for details
Sources: Company Financials, NSE, Investdata Research

Efficiency Ratio

  • Measuring management’s efficiency, we tested and observed that Operating Expenses (without depreciation and amortisation) is same as 25.54% of the Gross Earnings, a 4.74% growth over the 24.39% achieved in the corresponding year.
  • We also established that Gross Earnings is 9.21% of the Total Assets, a decline in management efficiency by 20.50%.
  • Although the industry’s primary regulator- the Central Bank of Nigeria (CBN) mandated a 65% Loan-to-Debt–Ratio (LDR), the management of GTBank only achieved only 46.05% LDR in the period under review, versus 56.90% in 2019.
  • See below for other observed efficiency ratios
Sources: Company Financials, NSE, Investdata Research

Investment Ratios

  • At the end of the period under review, the management of GTBank earned N6.84 per unit, a mild improvement over that of the corresponding year’s earnings of N6.69 each.
  • P/E-Ratio for full-year is put at 4.35x, up from 3.39x in the corresponding year.
  • Meanwhile, confirming the attractiveness of GTBank’s shares at the moment is the fact that the said earnings yielded 22.97% of the current market price, though below the 29.46% yield recorded in the comparable year of 2019. Please understand that this is still an outstanding yield.
  • Presently, the estimated Book Value of the bank stemmed below our intrinsic value at N27.67, an improvement over the N23.35 estimated in 2019.
  • See the table below for details:
Sources: Company Financials, NSE, Investdata Research


After carefully exploring our blend of valuation models, we have valued each units of Guaranty Trust Bank Plc at N39.69. Thus, considering the current market price Guaranty Trust bank on the exchange as of the time this report was concluded. We rate the shares a Strong Buy

Guaranty Trust Bank Five (5) Years History

Sources: Company Financials, NSE, Investdata Research

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