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April 28, 2022/FSDH Research

Key Performance Highlights:

• Guaranty Trust Holding reported its 1Q22 numbers with a 12.6% YoY jump in the gross earnings to N119.6 billion compared to N106.2 billion in 1Q21. However, the bank recorded a 5.1% YoY drop in the profit to N43.2 billion in 1Q22. The lackluster bottom-line performance was primarily due to a massive 70.7% YoY jump in interest cost and a 33.2% YoY increase in the other operating expenses.
   
• The 17.1% YoY increase in the interest income was due to a 29.5% YoY jump in interest income on financial assets at fair value through profit or loss to N6.7 billion in 1Q22 and a 16.0% YoY increase in interest income calculated using the effective interest rate to N63.9 billion in 1Q22. The interest income was boosted by a 73.3% YoY jump in investment securities at amortised cost to N7.8 billion in 1Q22 compared to N4.5 billion in 1Q21. However, the increase in the interest income was offset by a 70.7% YoY jump in interest expense to N13.4 billion in 1Q22, primarily due to a massive 84.5% YoY increase in the deposit from customers. Consequently, the net interest income rose 9.1% YoY to N57.2 billion in 1Q22. The loan impairment charges declined 35.0% YoY to N1.2 billion in 1Q22 due to a substantial reversal in Expected Credit Loss (ECL) and a “Significant Increase in Credit Risk (SICR)” in 1Q21, resulting in net Interest Income after impairment charges at N56.0 billion, a 10.7% YoY increase.
   
• The fee and commission income continues to be robust, with a 21.4% YoY spurt to N21.3 billion in 1Q22. The bank’s e-banking income raked in N4.05 billion, representing a 5.0% increase from N3.86 billion in 1Q21, while the commission on foreign exchange deals stood at N2.1 billion in 1Q22 compared to N1.5 billion in 1Q21. Looking at the fee and commission expenses, bank charges shrunk 40.8% YoY to N1.7 billion in 1Q22, while loan recovery expenses climbed 440.6% YoY to N920 million in 1Q22, resulting in a 13.1% YoY decline in fee and commission expenses to N2.6 billion. The net fee & commission income jumped 28.4% YoY to N18.8 billion in 1Q22 compared to N14.6 billion in 1Q21.
   
• The company recorded a 1.2% YoY increase in other income primarily due to mark-to-market gains on trading investments. The bank’s other operating expenses spurted 33.2% YoY to N29.3 billion in 1Q22. The significant jump in other operating expenses was fuelled by a 49.1% YoY increase in deposit insurance premium to N3.6 billion, coupled with a 23.3% YoY rise in AMCON expenses to N11.6 billion and a massive 137.6% YOY increase to N3.8 billion in administrative, communications and sponsorship-related expense in 1Q22. The profit before tax stood at N54.3 billion in 1Q22 compared to N53.7 billion in 1Q21. The effective tax rate shot up to 20.4% in 1Q22 from 15.2% in 1Q21, further reducing the profit after tax to N43.2 billion, a 5.1% YoY drop compared to N45.5 billion in 1Q21. The earnings per share came in at N1.51/share in 1Q22 versus N1.60/share in 1Q21.
   
• Looking at the sequential performance, the gross earnings declined 7.5% QoQ to N119.6 billion in 1Q22. A 1.7% QoQ fall in interest income and a 5.3% QoQ decline in interest expense, leading to a 0.8% drop in net interest income to N57.2 billion in 1Q22. The net fee & commission expense vaulted 35.7% QoQ in 1Q22 to N18.8 billion, offset by a 65.8% QoQ reduction in the other income to N12.3 billion in 1Q22 from N36.0 billion in 4Q21. The profit before tax stood at N54.3 billion in 1Q22, a significant 22.0% QoQ decrease from N69.6 billion in 4Q21. The company paid an effective tax of 20.4% in 1Q22, a 41.2% QoQ decline from the effective tax rate of 34.7% in 4Q21. This resulted in a 4.9% QoQ drop in the profit to N43.2 billion in 1Q22.
   
• Guaranty Trust Holding Plc has concluded the acquisition of the 100% equity stake in Investment One Pension Managers Limited and Investment One Funds Management Limited, the Mutual Fund and Pension Subsidiaries held by Investment One Financial Services Limited this quarter. It should also be noted that the Guaranty Trust Holding transitioned itself to a holding company in FY21.

Market Reaction: The investor reaction to 1Q22 performance was muted as the stock closed 1.24% lower at N23.95 versus a 0.01% gain for the All-Share Index on Wednesday (27/4).

Guaranty Trust Holding 1Q22 Earning Highlights

Source: Company Financials, FSDH