**Rating:** **Long Term: Buy** **Short Term: Buy**

**Current Market Price: N27.10**

**Loan to Deposit Ratio: 43.47%**

**Year High: N36.00**

**Year Low: N27.00**

**Fair Value: N38.17**

**Equity Analyst: Tunde Segun Jeariogbe**

**Key Financial Ratios**

- This report observed the half-year performance indices of Guaranty Trust HoldingCompany (GTCO) for the period ended 30
^{th}June 2021, compared same with figures for the corresponding period of 2020, to establish growth and performance ratings. - We maintained the full-year projections with full-year numbers while performing our valuation analysis, following which the intrinsic value remained high despite the induced drop in the price of its shares on the Nigerian Exchange.
- Note that Operating Expenses is minus Depreciation and Amortisation, which in our opinion avails us the opportunity to see the true expenses level applied for the valuation since the two major non-cash expenses had been removed.
- Within the period, GTCO posted lower profit; which grows deeper in the Comprehensive Income. We note that this should strictly be controlled, as the
**same was the situation in 2020** - See the table below for detailed information:

**Dividend Ratios**

- As has remained the culture of this financial institution, the board once again announced a 30 kobo interim cash dividend, the same as was paid in the comparable period of 2020.
- Please understand that the said dividend is the same as 11.12% of the profit realised through the six months of 2021, higher than the 9.37% of its profit paid as an interim dividend in the corresponding period of last year.
- Also, the dividend is a 1.11% yield of the share price of GTCO as of the time the result was presented to investors.
- The qualification date for the said interim dividend is 27th September 2021 while the payment is slated for 12th October 2021.
- See the table below for details.

**Company Figures**

- According to the report available on the NGX platform, Gross Earnings for the period stood at N207.19 billion, the same as 7.65% below the N225.13 billion reported in the corresponding period of last year.
- Interest Income at N126.09 billion fell 16.21% below the N150.48 billion posted in its 2020 second quarter numbers
- Interest Expenses amounted to N19.03 billion, versus N26.09 billion in the comparable period of 2020.
- Thus, Net Interest Income is estimated at N107.07 billion, which is lower than the N124.39 billion reported in the prior half-year.
- Operating Expenses grew by a marginal 4.76% to N71.57 billion, compared to N68.32 billion at the end of the 2020 first half.
- Profit before Tax, therefore, stood at N93.05 billion, from N109.71 billion in the similar previous of last year.
- Having removed the Tax Expenses due for the six-month period, N79.41 billion was reported as profit, a 15.76% drop from the N94.27 billion in a similar period in 2020.
- Note that the Total Comprehensive Income is estimated at N63.61 billion, 40.68% down from the N107.23 in 2020.

- Total Assets for the period was valued at N5.07 trillion, 11.22% higher than the N4.51 trillion estimated at the end of 2020.
- Total Liability (all Deposits inclusive) was estimated at N4.21 trillion, 11.33% above the N3.79 trillion posted in the whole of 2020.
- Net Assets therefore improved by 10.63% to N797.58 billion, versus N720.93 billion.
- Retained Earnings is now valued at N163.87 billion, 41.32% up from the 2020 half-year numbers.
- Total Deposits achieved through the quarter was valued at N3.75 trillion, as N3.08 trillion posted in 2020 full-year.
- Total Loans and Advances through the six months came to N1.63 trillion, 0.49% above the 2020 loans book.
- See the above table for details:

**Volatility Ratios**

- At the end of the period, the Debt Ratio is estimated at 84.10%, a marginal improvement over the 84.02% estimated from the corresponding period’s numbers.
- Thus, Total Debt is estimated at 529% of the Equity Value at the end of the period, which is 5.29 times replicate over equity used through the six months. It is important to note that it achieved 5.26 times replicate in the corresponding period.
- Establishing investors’ confidence in the bank is the Equity Ratio that compared Equity to Assets. We established that the equity is only 15.90% of the bank’s Total Assets, a reduced position when compared to the 15.98% reported in the corresponding period of last year.
- GTCO’s estimated Beta value confirmed a more liquid status, since it is above unity, as it stemmed above the industry average as of the time this report was compiled
- See the below table for details:

**Profitability Ratios**

- Pre-Tax Margin is valued at 44.76%, same as 8.16% below the previous estimate of 48.73%.
- Interest Expense is 9.16% of the Gross Earnings for the period, this is a lower performance when compared to the 11.59% in the similar period of 2020.
- The return achieved on Average Equity is approximately valued at 9.96% versus 13.08% in the comparable period.
- See the table below for details:

**Efficiency Ratio**

- Measuring management’s efficiency, we tested and established that the Operating Expenses (without depreciation and amortisation) is the same as 34.43% of the Gross Earnings, a drop in management efficiency when compared to the 30.35% achieved in the corresponding period.
- We also established that Gross Earnings is only 4.14% of the Total Assets, an improvement in management efficiency by 16.96%, when compared to the 4.99% achieved at the end of 2020 half-year.
- Although the regulatory body mandated a 65% Loan to Debt Ratio (LDR), the management of GTCO achieved only 43.47%. LDR through the quarter versus 52.63% in 2020.
- See the table below for other observed efficiency ratios.

**Investment Ratios**

- At the end of the quarter, the management of GTCO earned N2.70 per unit of its listed shares on the Exchange, lower earnings when compared to that of the corresponding period.
- Total Comprehensive Income Per share is estimated at N2.16, as against N3.64 in the corresponding period. Please observe that this further compounded the low performance through the half-year period.
- Our adjusted P/E-Ratio for the first half is 2.51 times, higher than 2.00x in the corresponding period.
- Meanwhile, confirming the low performance of GTCO at the moment is the fact that the said earnings yielded 9.98% of the current market price, below the 12.49% yield recorded in the comparable period of 2020
- Presently, the estimated Book Value of GTCO stemmed below our intrinsic value at N27.10, although this is an improvement over the N24.50 estimated from the 2020 half-year indices.
- Nevertheless, going by the Book Value against the current market price, we can say that GTCO is currently rightly valued on the exchange, with our estimated Price-to-Book Value ratio at unity, the same as the market Beta.
- See the table below for details:

**Valuation**

After carefully exploring our blend of valuation models, we have valued each unit of Guaranty Trust Holding Company Plc at **N38.17**. Thus, considering the current market price of GTCO on the Exchange as of the time this report was concluded, we Rate the shares a **Buy**.