FSDH Initial Reaction: Guaranty Trust Holding 3Q22 results
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October 31, 2022/FSDH Research

Key Performance Highlights:

• In 3Q22, Guaranty Trust Holding reported a 13.0% YoY growth in gross earnings to N125.0 billion compared to N110.6 billion in 3Q21. The robust growth in gross earnings was powered by a 23.7% YoY growth in interest income, partially offset by a 26.0% YoY increase in the interest expense, resulting in a 23.2% YoY jump in the net interest income. This increase was partially offset by a drop in other income and lower net gains on financial instruments held at FVPL. The bank recorded a 5.6% YoY increase in profit to N52.8 billion in 3Q22. The steady bottom-line performance was primarily due to solid growth in gross earnings, partially offset by higher Income tax expenses.
   
• The interest income rose by 23.7% YoY in 3Q22, driven by a 12.4% YoY rise in interest income calculated using the effective interest rate to N69.0 billion and a 116.7% YoY jump in interest income on financial assets at FVTPL to N16.3 billion in 3Q22. The interest expense grew 26.0% YoY to N16.5 billion in 3Q22, mainly driven by increased customer deposits. This led to a rise of 23.3% YoY in net interest income from N55.9 billion in 3Q21 to N68.8 billion in 3Q22. The loan impairment charges declined significantly by 85.9% YoY to N180 million in 3Q22.
   
• The fee and commission income remained robust, with an 11.7% YoY spurt to N20.5 billion in 3Q22, primarily supported by higher commissions, account services/maintenance charges, and corporate finance fees. With the fee and commission expenses plummeting 42.5% YoY to N1.9 billion in 3Q22, the company reported a 23.8% YoY jump in the net fee & commission income to N18.5 billion in 3Q22 as compared to N15.0 billion in 3Q21. The net gains on financial instruments held at FVPL dropped by 14.9% YoY in 3Q22 to N13.0 billion, and the other income decreased 22.3% YoY to N6.2 billion compared to N8.0 billion in 3Q21. Moreover, the depreciation and amortization charges increased by 7.0% to N9.7 billion, and the other operating expenses vaulted by 27.2% YoY. The profit before tax surged 13.0% YoY to N66.5 billion in 3Q22 versus N58.9 billion in 3Q21. The effective tax rate shot up to 20.6% in 3Q22 as against 15.1% in 3Q21, resulting in a profit after tax of N52.8 billion, a 5.6% YoY rise compared to N50.0 billion in 3Q21. The earnings per share came in at N1.88/share in 3Q22 versus N1.78/share in 3Q21.
   
• Looking at the sequential performance, the gross earnings inched 4.4% higher QoQ, with the net interest income increasing by 8.2% QoQ from N63.6 billion in 2Q22 to N68.8 billion in 3Q22. The net gains on financial instruments held at FVTPL jumped 56.9% to N13.0 billion in 3Q22, while the net fee & commission income decreased 11.7% QoQ to N18.5 billion in 3Q22 as compared to N21.0 billion in 2Q22. The profit before tax increased by 35.8% QoQ. The company paid an effective tax of 20.6% in 3Q22, compared to the effective tax rate of 29.8% in 2Q22. This further improved the sequential performance resulting in a 53.7% QoQ profit growth. Consequently, the earnings per share increased by 54.0% QoQ to N1.88/share.

Market Reaction: Investor reaction to the 3Q22 results was subdued as the stock closed 0.55% lower at N18.20 (26/10) versus a 0.16% gain for the All-Share Index (26/10).

Guaranty Trust Holding 3Q22 Earning Highlights

Source: Company Financials, FSDH