FSDH Initial Reaction: Guaranty Trust Holding 2Q22 results
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September 6, 2022/FSDH Research

Key Performance Highlights:

• In 2Q22, Guaranty Trust Holding reported a 17.6% YoY jump in gross earnings to N119.6 billion compared to N101.7 billion in 2Q21. The robust growth in gross earnings was powered by a 15.1% YoY growth in interest income calculated using an effective interest rate, coupled with a massive 426.3% YoY growth in the net gains on financial instruments held at FVPL. This growth was partially offset by a 29.1% YoY drop in other income. The bank recorded a 1.4% YoY increase in profit to N34.3 billion in 2Q22. The steady bottom-line performance was primarily due to solid growth in gross earnings, partially offset by a massive jump in Income tax expenses.
   
• The Interest income rose by 16.4% YoY in 2Q22, driven by a 15.1% YoY rise in interest income calculated using the effective interest rate to N7.1 billion in 2Q22 and a 36.1% YoY increase in interest income on financial assets at FVTPL to N5.5 billion in 2Q22. The interest expense grew 15.7% YoY to N12.9 billion in 2Q22, driven by a 17.0% YoY increase in deposits from customers. This led to a rise of 16.5% YoY in Net Interest Income from N54.6 billion in 2Q21 to N63.6 billion in 2Q22. The loan impairment charges were down 19.1% YoY to N2.3 billion in 2Q22.
   
• The fee and commission income continues to be robust, with a 21.4% YoY spurt to N25.1 billion in 2Q22. The bank’s e-banking income raked in N6.9 billion, representing a modest 4.3% increase from N6.6 billion in 2Q21, while the commission on foreign exchange deals stood at N2.0 billion in 2Q22 compared to N1.9 billion in 2Q21. Looking at the fee and commission expenses, bank charges shrunk a massive 248.9% YoY to N2.8 billion in 2Q22, while loan recovery expenses climbed 280.6% YoY to N1.3 billion in 2Q22, resulting in a 5.6% YoY decline in fee and commission expenses to N4.1 billion in 2Q22, leading to the Net Fee & Commission Income moving down by 5.6% to N21.0 billion in 2Q22 as compared to N22.2 billion in 1Q22. The Net gains on financial instruments held at FVPL jumped by 426.3% YoY in 2Q22 to N8.3 billion, primarily due to a net foreign exchange trading gain of N7.3 billion in 2Q22. However, the other income was down 29.1% YoY compared to N13.7 billion in 2Q21. The depreciation and amortization charges have declined by 21.3% to N8.4 billion, while the other operating expenses increased by 5.9% YoY. The profit before tax surged 24.4% YoY to N49.0 billion in 2Q22 versus N39.4 billion in 2Q21. The effective tax rate shot up to 29.8% in 2Q22 from 14.0% in 2Q21, resulting in a profit after tax of N34.3 billion, a 1.4% YoY rise compared to N33.9 billion in 2Q21. The earnings per share came in at N1.19/share in 2Q22 versus N1.18/share in 1Q22.
   
• Looking at the sequential performance, the gross earnings inched 0.1% higher QoQ, with the Net Interest Income increasing by 11.3% QoQ from N57.2 billion in 1Q22 to N63.6 billion in 2Q22. The Net Fee & Commission Income rose 12% QoQ to N21.0 billion in 2Q22 as compared to N18.8 billion in 1Q22, offset by a 45.7% QoQ reduction in the net gains on financial instruments held at FVTPL to N8.3 billion. The profit before tax shrunk by 9.8% QoQ. The company paid an effective tax of 29.8% in 2Q22, compared to the effective tax rate of 20.4% in 1Q22. This further deteriorated the sequential performance resulting in a 20.5% QoQ reduction in the profit. Consequently, the earnings per share declined 20.9% QoQ.
   
• Guaranty Trust Holding proposed an interim dividend of N0.30 per share (1H21: N0.30 per share), subject to deduction of appropriate withholding tax, will be paid to shareholders whose names appear in the books on September 20, 2022, for Ordinary shares and on September 12, 2022, for holders of GTCO’s Global Depositary Receipts (GDR).
   
• On June 2, 2022, Guaranty Trust Holding Plc announced the receipt of the final approval of the Central Bank of Nigeria for its wholly owned Payment Subsidiary, HabariPay Limited. The new subsidiary will work towards expanding the company’s range of services to underserved markets. All regulatory approvals have been obtained for the commencement of operations of the Payment Subsidiary.

Market Reaction: The investor reaction to 2Q22 performance was upbeat as the stock closed 0.51% higher at N19.90 versus a 0.11% fall for the All-Share Index on Monday (5/9). 

Guaranty Trust Holding 2Q22 Earning Highlights

Source: Company Financials, FSDH