Company: Guaranty Trust Bank Plc
Rating: Hold
Current Market Price: N34.80
NPL RATIO: 7.03%
Year High: N39.15
Year Low: N30.90
Fair Value: N40.50
Equity Analyst: Jeariogbe Tunde Segun
Key Financial Ratios
• This report observed the three-month financial performance of Guaranty Trust Bank Plc for the period ended 31st March 2019 and compares same with figures in the similar quarter of 2018.
• As noted above Non-Performing Loan ratio for the review period was 7.03%
• Comparing the released statistics with the corresponding quarter of 2018, we established that key performance ratios marginally improved over the performance indices of 2018.
Company Figures
• Gross Earnings for the period improved marginally by 2.18% over the comparable period of 2018 to N106.07 billion, as against N103.81 billion in the preceding first quarter.
• Interest Income stood at N74.48 billion, which is 7.79% below the amount reported in the same quarter of 2018.
• Interest Expense equally stepped below 2018 estimates by 22.85% and is currently estimated at N16.26 billion, when compared to N21.08 billion in the previous year.
• Profit before Tax reported for the quarter under analysis is N56.98 billion, representing 8.29% improvement over the N52.62 billion announced for the first three months of 2018.
• In a similar manner, the Net Profit for the period is estimated at N51.60 billion, better than the N44.67 billion made is the corresponding quarter of the prior year.
• Total Comprehensive Income, therefore, builds above 2018 estimate by 15.11% to N51.60 billion, up from N44.83 billion.
• Retained Earnings posted at the end of the period almost doubled at N154.41billion from N79.86 billion in 2018.
• Total Assets limped north by 1.40% as valued at N3.55 trillion, compared to the N3.50 trillion reported.
• Total Liabilities, on the other hand, inched south by 1.44% to N2.92 trillion as against the 2.97 trillion valued at the end of the preceding first quarter.
• Total Deposit through the first three months of 2019 is estimated at N2.51 trillion, this is 8.67% above the N2.31 trillion reported in 2018 Q1 result.
• Meanwhile, the Net Assets value reported at the end of the quarter is N627.17 billion against N535.12 billion achieved in 2018 first quarter.
Volatility Ratios
• The estimated beta value of 1 for Guaranty Trust Bank implies that it has the same volatility as the market itself, even though it is less volatile when compared to its industry peers at 1.49 average.
• In our opinion, this is due to the assumed high price the stock is currently sold on the exchange floor, compared to others in its group. Investors seem to settle for other stocks with lower unit prices.
• Total Debt to Equity Ratio established that ‘deposit liabilities and other debt’ are 4.67x of the Equity Value, which is typical of the players in the financial services sector. This is also an advantage, given that it will use cheaper debts to improve performance indices.
Profitability Ratios
• Estimated Interest Expense to Gross Earnings Ratio is currently estimated at 15.33%, which is 24.49% below the 20.31% estimated in similar period of 2018.
• Profit before Tax margin is 53.72% fairly above the 50.69% estimate of 2018 first quarter.
• Profit Margin has been estimated at 46.48%, same as 8.02% above the 43.03% estimated from the financial indices released in the corresponding period of 2018.
• Return on Assets stood slightly below the 2018 estimate. We have estimated 7.86% against 8.35%.
• Return on Assets is now 1.39%, same as 8.85% above the previously estimated 1.27%.
Efficiency Ratio
• Gross Earnings to Total Assets Ratio is 2.98%, slightly above the 2.96% estimated in 2018.
• Gross Earnings to Equity is 16.91%, from the previous 19.40% of 2018.
• Financial Leverage is impressive at 5.67 times, which is below the 6.55% estimated at the end of previous first quarter business activities.
• Loan to Deposit impressively dropped to 50.99%, as against the previous 58.56%.
• Loan & Advances to Total Assets is now 36.04%, this is 6.68% below 38.62% recorded in 2018 Q1.
Investment Ratios
• Following a similar trend as the company earnings, the estimated Earnings per Share is N1.68, which shows that the bank’s performance overrides that of 2018 by 10.37%.
• The said earnings yielded 4.82% of the current market price of Guaranty Trust Bank on the floor of the Nigerian Stock Exchange as at the time this report was made available to the investing public.
• Reflecting reduced confidence and at the same time a nearer recouping time of investment, the P/E-Ratio dropped by 29.01% to 5.19x as against the previous 7.31x.
• Revealing an overpriced status, the Price to Book value stood above unity at 1.63x, though below the previous 2.44x.
• Further revealing this stand is the Book Value per Share estimated at N21.31 compared to the N34.75 it is selling on the floor of the exchange when the result was released to the market.
• We have also checked the Operating Expenses Margin, which confirms the impact of operating expenses of the bank’s income. In our opinion, 15.33% is good for the bank, especially if this could be maintained.
Valuation
After carefully exploring our blend of valuation models, we have valued each unit of Guaranty Trust Bank Plc at N40.50. Thus, considering the current market price of N34.80 (as at the time this report was concluded), we Rate Guaranty Trust Bank shares a Hold.
