Corporate outcomes for Nigeria’s deposit money banks (DMBs) were mixed in 2021. Coming out of economic depression in 2020, bank performances in 2021 mirrored a V-shaped recovery, with macroeconomic indicators looking upwards. However, for most lending institutions, the V-shapes were of different heights. Banks with faster recoveries had steeper Vs, while GTCO, a member of Nigeria’s top-tier lending elite called FUGAZE (FBNH, UBA, GTCO, Access Bank, Zenith Bank, and ETI) was caught slightly wrong-footed as earnings growth flatlined.
The full-year (FY) 2021 audited result of the first-tier lender, saw top and bottom-line earnings slump, on the back of a -13.03% fall in net interest income while net fee and commission incomes rose year-on-year (Y-o-Y) by +39.88%. The financial position of HoldCo recorded improvement with increased customer deposits, shareholders’ funds, and customers’ loans and advances.
FY 2021 Result: Key Highlights
- Gross earnings fell year-on-year (Y-o-Y) by -1.63% to N447.81bn in 2021 from N455.23bn in 2020.
- Net interest income fell Y-o-Y by -13.03% to N220.61bn from N253.67bn in 2020
- Net fee and commission income edged up by +39.88% to N65.65bn from N45.94bn
- Net interest income margin dipped to 49.26% from 55.72% in 2020.
- Profit before tax declined by -6.97% to N221.49bn from N238.09bn in 2020
- Loans and advances to customers rose Y-o-Y by +8.41% to N1.80trn in 2021 from N1.66trn in 2020
- Deposit from customers grew by +14.33% to N4.01trn from N3.51trn in 2020
- Total assets inched up by +9.94% in 2021 to N5.44trn from N4.94trn in 2020
- Shareholder’s fund was up +8.45% to N883.23bn in 2021 from N814.39bn in 2020
- Return on average equity fell to 26.10% from 31.71% in 2020
- Return on average assets stumbled to 4.27% from 5.47% in 2020.
- The capital adequacy ratio fell to 23.83% in 2021, above the regulatory minimum of 15%, from 25.90% in 2020.
Swanky Dividend Payout
Analysts do not see strong capital appreciation for Guaranty Trust Holding Company (GTCO) as the bank and group’s share price has steadily declined between 2017 and 2021, however, the new banking group’s dividend yield has seen a steady rise as dividend payouts increase annually.
GTCO intends to pay a final dividend per share (DPS) of N2.70k in 2021 bringing total DPS to N3.00k, resulting in a dividend yield on a recent market price of N25.75 to 11.65% as of December 31, 2021 (see chart 1 below).
Chart 1: GTCO’s Dividend Yield 2017 – 2021
Source: GTCO’s Financial Statement
Value investors would likely be pleased by GTCO’s dividend yield as it almost matches the coupons on the Federal Government’s 10-year treasury bonds of 12.5% and yields of 10.95%.
Financial Performance
Gross Earnings: Riding the Dips
GTCO’s gross earnings fell Y-o-Y by -1.63% to N447.81bn from N455.23bn in 2020. Between 2017 and 2021, gross earnings had their highest decline in 2021; the trend also shows that although gross earning has been growing, it has done so at a declining rate. Market analysts expect the gross earning of the lender to continue its descent in the absence of deliberate efforts at growing revenue from expanding deposits. The Holdco may need to work from imagination rather than experience if it must raise its earnings growth rate.
For example, net interest income dipped by -13.03%, led by a -12.77% decline in interest income while interest expense fell marginally by -1.67%. Net fee and commission income rose Y-o-Y by +39.88% to N65.65bn in 2021 (see chart 2 below).
Chart 2: GTCO’s Gross Earnings 2017 – 2021 (N’bn)
Source: GTCO’s Financial Statement
In real or US dollar terms the group’s gross earnings fell by -17.74% to US$793.99m from US$965.25bn in 2020 (using BDC rates).
Profit Before Tax: A Little Less Gravy
The tier 1 lending institution’s profit before tax (PBT) fell by -6.97% to N221.49bn from N238.09bn 2021. Last year’s decline was the highest in the past five years 2017 to 2021, with 2017 showing the highest percentage growth (see chart 3 below).
Chart 3: GTCO’s Profit Before Tax 2017 – 2021 (N’bn)
Source: GTCO’s Financial Statement
Converting to US dollars, PBT had a higher percentage decline, it declined by -22.21% to US$392.73m from US$504.85m in 2020. The higher decline in US dollars was supported by the depreciation of the domestic currency against the US dollar.
Financial Position
Total Assets: The Game of Size
The total assets of the HoldCo rose Y-o-Y by +9.94% to N5.44trn from N4.94trn in 2020. Total assets have trended upwards, although the growth rate in 2021 was lower than the +31.54% posted in 2020. Growth in total assets was supported by a +198.65% rise in investment securities held at amortized cost and a +25.22% increase in cash and bank balances (see chart 4 below).
Chart 4: GTCO’s Total Assets 2017 – 2021 (N’trn)
Source: GTCO’s Financial Statement,
Translating to US dollars, total assets had a significantly slower percentage growth rate of -8.07% to US$9.64bn in 2021 from US$10.48bn in 2020.
Net Loans & Deposits
In 2021, the net loans to deposit ratio (LDR) continued to slide from 47.38% in 2020 to 44.93%. Both loans and advances to customers and customer deposits had a lower growth rate in 2021 against 2020 figures. Net loans and advances grew by +8.41% in 2021 against +10.81% in 2020, while customer deposits rose Y-o-Y by +14.33% to N4.01trn in 2021 lower than the previous +38.57% recorded in 2020 (see chart 5 below).
Chart 5: GTCO’s Loans-to-Deposit Ratio 2017 – 2021
Source: GTCO’s Financial Statement,
Closing Thoughts-The Analysts Mindset
The financial position of GTCO improved in 2021, its earnings position may have been a bit shaky as growth slowed down but the lenders fundamentals have remained strong. The tier 1 DMBs strength is consistent with its consistent history of growth in its operating figures, the recent slight glitch in the pace of earnings may require the lenders management to reimagine customer needs and build service delivery channels that inspire repeat use. The steady growth of the banks deposit base and customer numbers has put strains on its service delivery capacity thereby requiring management’s urgent action. The decline in the group’s capital adequacy ratio (CAR) from 25.90% in 2020 to 23.83% in 2021 has raised a few eyebrows, but the lending group’s CAR in both years still exceeded the statutory minimum of 15% for systemically important banks (SIBs)
Asset quality performance (NPL), cost-to-income ratio (CIR), and cost of risk (CoR) are individual indices to continue to monitor (consolidated annual report), as they tell the sustainability story of the HoldCo about its cost containment priorities.
