GTBank: Demonstrating fundamental strength to deliver sustainable long-term growth

GTBank: Demonstrating fundamental strength to deliver sustainable long-term growth

Mid last week, Guaranty Trust Bank Plc released its audited full year 2016 group financial statements for the period ended December 31, 2016 together with directors’ and auditor’s reports.

GTBank Plc successfully navigated the heightened economic uncertainty and regulatory headwinds which dominated the review year to deliver a solid performance across all financial and non-financial indices.

The bank’s full year results

The Tier-1 lender reported gross earnings for the period grew by 37percent to N414.62billion, from N301.85billion reported in the December 2015.

The results at the Nigerian Stock Exchange (NSE) showed the group interest income increased to N262.494billion from N229.236billion in 2015, an increase of 14.51 percent. Fee and commission income declined to N51.273billion from N51.865billion in 2015, down by 1.14 percent.

GTBank Plc report Full Year 2016 profit before tax (PBT) of N165.14billion, representing a growth of 37percent over N120.69billion recorded in the corresponding period of December 2015.

Also, the group’s after tax profit for the year 2016 rose by 33.03percent to N132.280billion from N99.436billion in 2015.

The bank’s loan book grew by 16 percent, from N1.373trillion recorded as at December 2015 to N1.590trillion in December 2016 with corresponding growth in total deposits which increased by 29percent to N2.111trillion from N1.637trillion in December 2015.

Operating expenses increased to N113.6billion an increase of 18 percent from N96.4billion in 2015. GTBank Plc reported 29 percent increase in Total Deposits in 2016 to N2.111trillion from N1.636trillion in 2015.

GTBank proposes final dividend of 175kobo per share in addition to interim dividend of 25kobo per unit of ordinary share bringing total dividend for 2016 financial year to 200kobo per unit of ordinary share; 13 percent increase when compared with 177kobo total dividend GTBank paid in 2015. Its Earnings Per Share (EPS) grew by 33percent, to 467kobo from 351kobo in 2015.

Also, the bank’s non-performing loans remained low and within regulatory threshold at 3.66 percent (bank: 3.29percent) with adequate coverage of 131.79 percent (bank: 150.80percent).

Increase in collective impairment was borne out of the prudent stance of the Bank, while Capital remains strong with Capital Adequacy Ratio (CAR) of 19.79percent. On the backdrop of this result, Return on Equity (ROAE) and Return on Assets (ROAA) closed at 35.96 percent and 5.85 percent respectively.

Management comments 

Segun Agbaje, Managing Director/CEO, Guaranty Trust Bank Plc while commenting on the results said the bank’s financial performance in 2016, “does not only reflect the resilience of our franchise, it demonstrates the fundamental strength of our businesses to deliver sustainable long-term growth.”

Agbaje noted that: “We are transforming our organisation into a platform for enriching lives by positioning ourselves at the centre of an extended ecosystem that offers our stakeholders, benefits beyond banking.”

“We also remain committed to maximising shareholders’ value and delivering superior and sustainable return, guided by our founding values of hard work, discipline and integrity,” the bank CEO said.

Analysts’ views on GTBank results

Sewa Wusu, Head, Research & Investment Advisory, SCM Capital Limited told INVESTOR that, “Guaranty Trust Bank Plc top and bottom line improved considerably in line with expectation.”

His words: “The positive side was the support garnered from FX induced revaluation gains on account of its net dollar position on the balance sheet. Overall, the results were positive, reflecting an increase in earnings per share (EPS) by 33 percent to N4.49kobo.”

“I think the market is yet to respond appropriately to its corporate action despite the positive outing. This may not be unconnected to the current weak market sentiments”, Wusu noted.

Olalekan Olabode led team analysts at Vetiva Capital Management Limited said GTBank’s record full year profit tracks Vetiva analysts’ estimates. Already, Vetiva analysts have updated their research model and forecast to reflect some of the positive surprises in GTBank’s results.

“With our expectation of a more stable FX environment, we estimate a notable moderation in Non-Interest Income. That said, we expect Interest Income to remain strong, supported by our mild 8 percent real credit growth expectation. Overall, our Trading Price (TP) is little changed at N31.81 (Previous: N32.16),” Vetiva analysts added.

Also, Olubunmi Asaolu team of analysts at FBNQuest said, “A proposed final dividend of 175kobo implies a yield of 6.7%. This dividend is higher than the 152kobo paid for 2015 (we had forecasted 152kobo for the 2016 final dividend).”

“Broadly speaking the results were in line with consensus expectations on the PBT line. However, the PAT appears soft due to a negative surprise on the tax line,” FBNQuest analysts said.

Notes to the full year numbers

GTBank Plc noted in its 2016 full year investors/analysts presentation that record solid PBT reflects growth across key performance indices despite weak macro. Growth in Gross Earnings was driven by N33.3billion increase in interest income and N79.5billion increase in non-interest income.

This was largely as a result of its N87.3billion increase in foreign exchange (FX) revaluation gains partially offset by N7.6billion decline in FX trading income as a result of restriction on FX spread and decline in volume following the FX scarcity that characterised the business environment in 2016.

The growth in the bank’s Operating Expense (OPEX) was largely from increase in regulatory cost in Nigeria and the impact of the translation of subsidiaries’ OPEX to presentation currency of the parent on the back of the depreciation of naira against US dollar.

The strength of GTBank Plc earnings provided headroom for the recognition of N50.8billion in collective impairment due to its conservative stance to create reserves for probable FX devaluation risk on the trade finance book or other loan default.

Despite inflationary pressure on cost, Cost to Income Ratio (CIR) remained low due to a combination of strengthened revenue and improved operational efficiency.

Guaranty Trust Bank Plc

Guaranty Trust Bank Plc is a leading African financial institution with vast business interests spanning West and East Africa, as well as the United Kingdom.

Since its establishment in 1990, Guaranty Trust Bank Plc is recognised as one of the most profitable and well managed financial institutions in Africa for providing quality service, ethics, professionalism, integrity, innovation and internationally accepted corporate governance standards.

In the review financial year, the bank’s balance sheet remained strong with a 19.7 percent growth in total assets and contingents as GTBank Plc closed the year ended December 2016 with Total Assets and Contingents of N3.70trillion and shareholders’ funds of N504.9billion.

GTBank Plc employs over 10,000 people in Nigeria, Gambia, Ghana, Liberia, Sierra Leone, Cote d’Ivoire, Uganda, Rwanda, Kenya and the United Kingdom. With a market capitalisation in excess of N721.063billion, GTBank Plc shares outstanding are 29,431,179,224 units. Its share price as at Monday 13th March 2017 was N24.5kobo. 

Iheanyi Nwachukwu

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