FSDH Initial Reaction: Guaranty Trust Holding FY21 results
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March 9, 2022/FSDH Research

Key Performance Highlights:

• Guaranty Trust Holding reported its FY21 numbers with a 1.6% YoY drop in the gross earnings to N447.8 billion compared to N455.2 billion in FY20. A 39.4% YoY growth in Fee & Commission Income was overshadowed by an 11.3% decline in interest income, resulting from decreased cash and cash equivalents from investment securities FVOCI to N14.5 billion in FY21 from N68.6 billion in FY20, leading to a drop in gross earnings. The company also recorded a 9.9% YoY growth in the other income, partially offset by an 8.6% YoY drop in the net gains on financial instruments held at FVPL. Note that the fee and commission income has consistently posted robust performance over the past few quarters, while the interest income has been consistently falling in every quarter in FY21.
   
• The 11.3% YoY fall in the interest income was due to a 12.8% YoY drop in income from Investment securities to N251.5 billion in FY21, slightly offset by a 5.1% YoY jump in income from loans and advances to N195.0 billion in FY21. The drop in the interest income coupled with a marginal 1.7% YoY fall in interest expense resulted in a 13.0% YoY decline in the net interest income to N220.6 billion in FY21. The loan impairment charges declined 56.4% YoY to N8.5 billion in FY21, given the improved economic environment, resulting in net Interest Income after impairment charges at N212.1 billion, a 9.4% YoY drop.
   
• The fee and commission income continues to be robust, with a 39.4% YoY jump to N74.1 billion in FY21. The group’s E-business income reported under the fee and commission line continues to lead the segment growth with a 79.1% YoY spike to N21.1 billion in FY21 from N11.8 billion in FY20. Account services, maintenance, and ancillary banking charges jumped 146.5% this year to N9.4 billion from N3.8 billion in FY20. Looking at the fee and commission expenses, bank charges ballooned 41.3% YoY to N5.7 billion in FY21, while loan recovery expenses climbed 25.3% YoY to N2.7 billion in FY21, resulting in a 35.7% YoY growth in fee and commission expenses to N8.5 billion. The net fee & commission income jumped 39.9% YoY to N65.7 billion in FY21 compared to N46.9 billion in FY20.
   
• The company recorded a net trading income of N22.4 billion in FY21, out of which N17.1 billion is arising from net foreign exchange trading gain, while Bonds FVPL recorded a massive 41.9% drop in value. The bank’s personnel expenses were down 11.1% YoY to N33.4 billion in FY21, while other operating expenses increased 18.9% YoY to N93.5 billion in FY21. The significant jump in other operating expenses was fuelled by a 43.9% YoY increase in deposit insurance premium to N12.2 billion, coupled with a 26.5% YoY rise in communications, technological-related expense, and administrative expense and a massive 604.9% YOY increase to N6.5 billion in general welfare expenses in FY21. The profit before tax stood at N221.5 billion in FY21, a 7.0% drop from N238.1 billion in FY20. The effective tax rate was up 21.1% in FY21 from 15.4% in FY20, further reducing the profit after tax to N174.8 billion, a 13.2% YoY drop compared to FY20. The earning per share came in at N6.14/share in FY21 versus N7.11/share in FY20.
   
• Looking at the quarterly performance, the gross earnings increased marginally by 3.2% to N129.3 billion in 4Q21. A humongous 65.4% YoY increase in interest expense offset the increase in the gross earnings, leading to a 9.8% drop in net interest income to N57.7 billion in 4Q21. The fee & commission expense jumped 135.8% in 4Q21 to N3.7 billion, partially offset by a 55.9% YoY reduction in the personnel expenses to N3.9 billion in 4Q21. The profit before tax stood at N69.6 billion in 4Q21, a marginal 1.6% decrease from N70.7 billion in 4Q20. The company paid an effective tax of 34.7% in 4Q21, a 111.9% YoY increase from the effective tax rate of 16.4% in 4Q20. This further pulled down the profit by 23.9% YoY to N45.4 billion in 4Q21. Earnings per share also recorded a 23.9% YoY drop to 1.59 per share in 4Q21.

Market Reaction: Guaranty Trust Holding stock remained unchanged at N26.00 against a marginal 0.01% fall for the All-Share Index (7/3).

Guaranty Trust Holding FY21 Earning Highlights

Source: Company Financials, FSDH