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GTCO Outperforms Peers With Highest Return on Equity

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Guaranty Trust Holding Company (GTCO) Plc regained the top spot in the banking industry as the lender has the highest return on equity, turning assets into cash than peer rivals, and an attractive valuation is an entry point for investors.

In spite of the challenges in the operating environment and its attendant negative implication on the activities of individuals, households and businesses, GTCO posted a return on average equity of (ROAE) of 24.40 percent as at March 2023.

That compares with United Bank for Africa, (22.62 percent); Access Bank, (21.82 percent);  Zenith Bank, 19.62 percent, and FirstBank Holdings, 14.50 percent (based on Q1 2022 financial results).

Of course, the improvement in ROAE is largely driven by a strong expansion in profit which is the largest among Tier-1 lenders.

GTCO’s net income or profit after tax (PAT) expanded by 25.72 percent as at March 2023.

That compares with UBA’s (22.57 percent); Access Bank, (19.30 percent); and Zenith Bank, (14.40 percent).

The stellar performance validates the Bank transitioning to a Holding Company Structure it adopted a few years ago with a view to more value for shareholders.

“As the Financial Holding Company continues to gain traction, we expect the revenue streams to become stronger and further diversified to withstand further stresses,” said the Bank.

The Bank expects income from Non-Banking Subsidiaries (i.e., Payments, PFA, and Asset Management) to strengthen and account for 2-3% of the Group’s performance by FY-2024.

GTCO said it benefited from the effective utilisation of its strategic, core and foundational capabilities; changing and adapting quickly to make the best use of opportunities and deal with challenges.

The Nigerian Banking industry walks on rotten ice due to deteriorating macroeconomic conditions, opaque exchange regime, rising inflation as investors have dumped sector players’ shares.

Also, they are susceptible to bad loans that relate to their Ghana operations. While such a transaction is a one-off event, lenders will have to recapitalise  their West African operations so as to avert a recurrence of spiraling loan loss expense.

GTCO shares are attractive and a buy opportunity for investors who want to magnify their investments.

It has a price to earnings multiple of 3.70 and a dividend yield of 12.70 percent.

The Bank started the year with a total asset of N6.70 representing a growth of 4.55 percent N6.44 trillion posted in March 2022; maintaining a well-structured and diversified Balance sheet across all its Banking and Non-Banking Entities (Nigeria, Other West Africa, East Africa, United Kingdom, Payments, Pension and Asset Management).

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