CardinalStone Partners Ltd. has lowered its 12-month target price for Guaranty Trust Holding Co.(GTCO) by 10.3%, to N143.13 from N159.65.
The Lagos-based brokerage said loan growth fell well short of its expectations in the first nine months, and that the Central Bank of Nigeria’s (CBN) September rate cut will squeeze the lender’s margins further.
CardinalStone kept a buy rating on the stock, according to a November 4 company update written by analysts Stephen Chima and Ngozi Odum.
The new target implies a 22.3% gain from the reference price of N117.00, which is 25.5% below its 52-week high of N156.95.
The brokerage now forecasts 2026 profit after tax of N816.5 billion, down from N1.1 trillion. It cut its earnings-per-share forecast 26.1% to N22.03 from N29.80.
GTCO’s nine-month results “fell materially short of our expectations for loan growth and, consequently, gross earnings,” the analysts wrote.
Why the Target Fell
The analysts gave four reasons for the cut.
1. Lending stalled. CardinalStone now expects GTCO’s gross loans to grow just 2.0% in 2026, down from its previous forecast of 15.0%. Net loans fell 4.1% in the nine months, and interest-earning assets grew only 0.1%.
Total assets rose 3.5% to N18.4 trillion, well below the 22.1% full-year growth the brokerage had projected. Over five years, it now expects loan growth to average 16.0% a year, down from 19.5%.
2. The rate cut hurts margins. The note called the CBN’s 350 basis-point “MPR reset” on September 22 a “clear headwind” for asset yields, which were already falling.
Yields fell to 13.5% in the nine months from 14.6% in 2025, while net interest margin narrowed to 9.8% from 11.1%. CardinalStone now expects a 2026 margin of 9.4%, down from 11.0%, and 8.8% in 2027. It expects the CBN to cut its policy rate by a further 400 to 600 basis points in 2027 and 2028. It also warned that “a larger-than-expected rate cut” is a major downside risk.
3. Fee income disappointed. E-business income rose 40.6% to N60.8 billion. However, account maintenance and other banking charges fell 31.8% to N23.8 billion, and credit-related fees grew only 7.4%.
CardinalStone now expects non-interest income to fall 7.6% to N427.8 billion in 2026, against its previous forecast of N589.8 billion. The analysts cited the “outsized impact” of N87.9 billion in unrealised fair-value losses. GTCO has used N421.0 billion of credit-linked notes to hedge against those losses.
4. Returns will be lower. After the changes, CardinalStone expects GTCO’s return on equity to average 24.2% over five years, down from 30.4%.
A Business Built on Placements
The note highlights how much GTCO has relied on cash and securities instead of lending.
Interest income from cash and cash equivalents rose 62.2% and now makes up 24.7% of total interest income, up from 16.0%.
Management said most of those placements are with “AAA-rated offshore banks” where yields have risen. Interest income from securities held at fair value through profit or loss rose 83.9%. Together, they were “critical” to the 5.0% rise in total interest income, CardinalStone said.
GTCO Worrying Business Model Flagged
MoneyCentral had earlier flagged GTCO’s operations as worrying, as its 9M results exposed a business model that now relies more on government securities than on lending.
The MoneyCentral report concluded that:
“With a small balance sheet that management refuses to deploy into lending, Fintechs like OPAY and MoniePoint eating its lunch, and Tier-One names such as Zenith Bank and FirstHoldCo muscling it out with their bigger balance sheets that they are deploying in loans, investors in GTCO will likely continue to remain in worrying agony for a while, until a new business model is deployed by the bank.”
GTCO’s Worrying Business Model: Loan Book Shrinks, Profit Falls 12% and Deposit Costs Jump 43%
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