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While there has been a selloff in banks’ stocks due to negative investor sentiment around the expected dilutive impact of the proposed recapitalisation on banks’ earnings per share (EPS), investors are sanguine Guaranty Trust Holdings Company (GTCO) Plc will deliver higher returns.
The aforementioned is based on the latest report by Chapel Hill Denham Limited.
Having overtaken Zenith Bank to become the most profitable lender in Nigeria, GTCO’s negative year to date (YTD) return of -1.38 percent is mild compared to the sector’s YTD return of -12.70 percent vs NGX ASI +31.30 percent.
The most efficient lender has the lowest cost to income ratio in the industry as it emphasises on efficacy of operations while investing in the latest technologies to bolster efficiency.
“Despite this (negative YTD compared to NGX ASI), we note that some investors are picking up the stock and reinvesting dividends at current price level, which is a good entry point,” said analysts at Chapel Hill Denham Limited.
With a price to earnings ratio of 1.14 times and a dividend yield of 8.18 percent, the attractive valuation of the stock cannot be overemphasised.
Deploying timely, appropriate, and efficient strategies to navigate the vagaries of macros across its jurisdiction of operations, GTCO recorded annualised return on average equity of 105 percent as at March 2024.
At the current rate, analysts at Chapel Denham are optimistic GTCO is still on the path to deliver double digit EPS and ROAE well above 40 percent as at full year (FY) 2024, as seen in FY 23.
Analysts at Chapel Hill Denham said they factored in the additional capital raise of N500 billion that would help lift EPS by 11 percent to N20 for FY 2024 in the earnings forecast.
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