FSDH Initial Reaction: Guaranty Trust Holding 1Q23 results
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May 3, 2023/FSDH

Key Performance Highlights:

• In 1Q23, Guaranty Trust Holding reported a 32.2% YoY growth in gross earnings to N158.1 billion compared to N119.6 billion in 1Q22. The robust growth in gross earnings was powered by a 47.3% YoY growth in interest income (65.8% of total gross earnings), which was partially offset by a 63.2% YoY increase in the interest expense, resulting in a 43.6% YoY jump in the net interest income. Moreover, the increase in gross earnings was supported by a 52.0% YoY jump in the fee & commission income (20.5% of total gross earnings), partially offset by lower net gains on financial instruments held at FVPL (6.7% of total gross earnings) and an 11.1% YoY decline in other income (6.9% of total gross earnings). The bank recorded a 34.6% YoY increase in net profit to N58.2 billion in 1Q23 due to robust gross earnings growth, partially offset by higher loan impairments.
   
• The interest income rose by 47.3% YoY to N104.1 billion in 1Q23, driven by a 51.0% YoY rise in interest income calculated using the effective interest rate to N96.6 billion and a 12.0% YoY jump in interest income on financial assets at FVTPL to N7.5 billion in 1Q23. The interest expense grew 63.2% YoY to N21.9 billion in 1Q23, mainly driven by increased customer deposits to N19.9 billion in 1Q23 (1Q22: N12.7 billion). This led to a 43.6% YoY rise in net interest income from N57.2 billion in 1Q22 to N82.2 billion in 1Q23. Moreover, the loan impairment charges spiralled 184.8% YoY to N3.4 billion in 1Q23, resulting in net interest income after impairment charges at N78.7 billion, a 40.6% YoY expansion.
   
• The fee and commission income maintained robust momentum, with a 52.0% YoY spurt to N32.4 billion in 1Q23, driven by higher commissions, e-business income, and corporate finance fees. With the fee and commission expenses decreasing 3.2% YoY to N2.5 billion in 1Q23 due to lower loan recovery expenses, the company reported a 59.6% YoY jump in the net fee & commission income to N29.9 billion in 1Q23 as compared to N18.8 billion in 1Q22. The net gains on financial instruments held at FVPL declined by 30.5% YoY in 1Q23 to N10.6 billion, mainly due to a decline in bonds and treasury FVPL and foreign exchange trading gains. Other income decreased 11.1% YoY to N10.9 billion compared to N12.3 billion in 1Q22.
   
• Moreover, personnel expenses increased 5.8% YoY to N10.4 billion due to higher wages, and the other operating expenses vaulted 24.1% YoY to N36.4 billion in 1Q23, primarily due to rising higher insurance premiums, AMCON expenses, communications, and technology-related costs. Consequently, the profit before tax rose 36.5% YoY to N74.1 billion in 1Q23 versus N54.3 billion in 1Q22. The effective tax rate was 21.5% in 1Q23 as against 20.4% in 1Q22, and the company reported a profit after tax of N58.2 billion, a 34.6% YoY jump compared to N43.2 billion in 1Q22. The earnings per share came in at N2.04/share in 1Q23 versus N1.51/share in 1Q22.
   
• Looking at the sequential performance, the gross earnings declined 9.6% QoQ to N158.1 billion in 1Q23. A 12.0% QoQ increase in interest income and a 5.9% QoQ decline in interest expense led to an 18.0% QoQ jump in net interest income to N82.2 billion in 1Q23. The net fee & commission income vaulted 56.3% QoQ in 1Q23 to N29.9 billion, while other income declined to N10.9 billion in 1Q23 from N54.7 billion in 4Q22, an 80.0% QoQ reduction. The profit before tax stood at N74.1 billion in 1Q23, a significant 66.8% QoQ increase from N44.4 billion in 4Q22. Although the company paid an effective tax of 21.5% in 1Q23, compared to the effective tax rate of 12.6% in 4Q22, Guaranty Trust Holding reported a 49.8% QoQ rise in the profit to N58.2 billion in 1Q23 against N38.8 billion in 4Q22.

Market Reaction: Investor reaction to the solid 1Q23 results was positive as the stock jumped 3.17% to close at N22.75 versus a 0.20% fall for the All-Share Index (2/5).

Guaranty Trust Holding 1Q23 Earning Highlights

Source: FSDH, Company data