FSDH Initial Reaction: Guaranty Trust Holding 2Q23 results
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September 5, 2023/FSDH

Key Performance Highlights:

• In 2Q23, Guaranty Trust Holding reported a massive 329.8% YoY growth in gross earnings to N514.5 billion compared to N119.6 billion in 2Q22. The solid growth in gross earnings was driven by a ~37.3x YoY jump in other income to N361.3 billion (70.2% of total gross earnings in 2Q23) in 2Q22 due to foreign exchange revaluation gain. Moreover, a 59.2% YoY growth in interest income (23.7% of total gross earnings in 2Q23), partially offset by a 105.7% YoY rise in the interest expense, resulted in a 49.8% YoY jump in the net interest income. Additionally, the gross earnings were supported by a 3.3% YoY jump in the fee & commission income (5.1% of total gross earnings), partially offset by lower net gains on financial instruments held at FVPL (1.0% of total gross earnings). The bank’s net profit vaulted 6.5x YoY to N222.3 billion in 2Q23, mainly due to other income and robust interest income growth, partially offset by higher loan impairments.
   
• The interest income rose by 59.2% YoY to N121.9 billion in 2Q23, driven by a rise in interest income on loans and advances to customers and a higher interest income on investment securities FVOCI. The interest expense grew 105.7% YoY to N26.6 billion in 2Q23, mainly driven by increased customer deposits during the period. This led to a 49.8% YoY rise in net interest income from N63.6 billion in 2Q22 to N95.3 billion in 2Q23. However, the loan impairment charges soared ~34.4x YoY to N79.5 billion in 2Q23, resulting in net interest income after impairment charges at N15.9 billion, a 74.3% YoY decline.
   
• The fee and commission income grew 3.3% YoY to N26.0 billion in 2Q23, driven by higher e-business income, commissions, and account maintenance charges. Due to higher Bank charges, fee and commission expenses increased 5.7% YoY to N4.4 billion in 2Q23. The bank reported a 2.9% YoY jump in the net fee & commission income to N21.6 billion in 2Q23 as compared to N21.0 billion in 2Q22. The net gains on financial instruments held at FVPL declined by 35.1% YoY in 2Q23 to N5.4 billion, mainly due to a decline in bonds and treasury FVPL and foreign exchange trading gains. Other income jumped ~37.3x YoY to N361.3 billion compared to N9.7 billion in 2Q22, primarily due to a foreign exchange revaluation gain of N357.5 billion in 2Q23.
   
• Furthermore, personnel expenses increased 19.3% YoY to N10.4 billion due to higher wages, and the other operating expenses vaulted 43.2% YoY to N49.1 billion in 2Q23, primarily due to rising administrative expenses, AMCON expenses, and customer service-related expenses. The profit before tax rose 417.3% YoY to N253.3 billion in 2Q23 versus N49.0 billion in 2Q22. The effective tax rate was 12.2% in 2Q23 as against 29.8% in 2Q22, and the company reported a profit after tax of N222.3 billion, a 547.2% YoY jump compared to N34.3 billion in 2Q22. The earnings per share came in at N7.90/share in 2Q23 versus N1.19/share in 2Q22.
   
• Looking at the sequential performance, the gross earnings surged 225.4% QoQ to N514.5 billion in 2Q23. Net interest income increased 16.0% QoQ to N95.3 billion in 2Q23, while the net fee & commission income declined 27.8% QoQ in 2Q23 to N21.6 billion. Notably, other income vaulted ~33x QoQ to N361.2 billion in 2Q23 from N11.0 billion in 1Q23 due to foreign exchange revaluation gain. The profit before tax stood at N253.3 billion in 2Q23, a 241.9% QoQ increase from N74.1 billion in 1Q23. The company paid an effective tax of 12.2% in 2Q23, compared to the effective tax rate of 21.5% in 1Q23. Consequently, Guaranty Trust Holding reported a significant 282.2% QoQ rise in the profit to N222.3 billion in 2Q23 against N58.2 billion in 1Q23.
   
• Guaranty Trust Holding proposed an interim dividend of N0.50 per share (1H22: N0.30 per share), subject to deduction of appropriate withholding tax, which will be paid to shareholders whose names appear in the books on September 14, 2023, for ordinary shares and on September 5, 2023, for holders of GTCO’s Global Depositary Receipts (GDR).

Market Reaction: Investor reaction to the solid 2Q23 results was buoyant as the stock jumped 6.58% to close at N40.50 versus a 1.11% gain for the All-Share Index (4/9).

Guaranty Trust Holding 2Q23 Earning Highlights

Source: FSDH, Company data