FSDH Initial Reaction: Guaranty Trust Holding 3Q23 results
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October 25, 2023/FSDH Research

Key Performance Highlights:

• In 3Q23, Guaranty Trust Holding reported a 42.2% YoY growth in gross earnings to N177.7 billion compared to N125.0 billion in 3Q22. The robust growth in gross earnings was driven by a 74.2% YoY growth in interest income (83.6% of total gross earnings in 3Q23), further boosted by a 33.6% YoY jump in the fee & commission income (18.5% of total gross earnings), and marginal 1.1% YoY growth net gains on financial instruments held at FVPL (7.4% of total gross earnings), partially offset by a negative N17.0 billion (-9.5% of total gross earnings) other income due to loss on trading investments in 3Q23. The bank’s net profit surged 64.7% YoY to N86.9 billion in 3Q23, mainly due to robust interest income growth, partially offset by higher loan impairments.
   
• The interest income grew by 74.2% YoY to N148.6 billion in 3Q23, 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 increased 73.4% YoY to N28.5 billion in 3Q23, mainly driven by increased customer deposits during the quarter. This led to a 74.4% YoY rise in net interest income from N68.8 billion in 3Q22 to N120.1 billion in 3Q23. However, the loan impairment charges soared ~36.1x YoY to N6.5 billion in 3Q23, resulting in net interest income after impairment charges at N113.6 billion, a 65.4% YoY rise.
   
• The fee and commission income jumped 33.6% YoY to N32.9 billion in 3Q23 due to higher e-business income, commissions on foreign exchange deals, and account maintenance charges. Due to higher Bank charges, fee and commission expenses increased 2.6% YoY to N2.0 billion in 3Q23. The bank reported a 36.2% YoY rise in the net fee & commission income to N30.9 billion in 3Q23, compared to N22.7 billion in 3Q22. The net gains on financial instruments held at FVPL marginally increased by 1.1% YoY in 3Q23 to N13.2 billion, mainly due to a rise in bonds and treasury bills FVPL. Other income came in at negative N17.0 billion compared to N2.1 billion in 3Q22, primarily due to loss on trading investments.
   
• Furthermore, personnel expenses soared 39.9% YoY to N16.8 billion due to higher wages, and the other operating expenses climbed 64.4% YoY to N30.0 billion in 3Q23, primarily due to rising outsourcing services, technology-related expenses, AMCON expenses, and customer service-related expenses. The profit before tax rose 59.2% YoY to N105.8 billion in 3Q23 versus N66.5 billion in 3Q22. The effective tax rate was 17.8% in 3Q23 against 20.6% in 3Q22, and the company reported a profit after tax of N86.9 billion, a 64.7% YoY jump compared to N52.8 billion in 3Q22. The earnings per share came in at N3.10/share in 3Q23 versus N1.88/share in 3Q22.
   
• Looking at the sequential performance, the gross earnings declined 65.5% QoQ to N177.7 billion in 3Q23. Net interest income increased 26.0% QoQ to N120.1 billion in 3Q23, while the net fee & commission income declined 43.1% QoQ in 3Q23 to N30.9 billion. Notably, other income was negative N17.0 billion in 3Q23 due to a loss on trading investments, compared to N361.3 billion in 2Q23, which were driven by foreign exchange revaluation gains. The profit before tax stood at N105.8 billion in 3Q23, a 58.2% QoQ decrease from N253.3 billion in 2Q23. The company paid an effective tax of 17.8% in 3Q23, compared to the effective tax rate of 12.2% in 2Q23. Consequently, Guaranty Trust Holding reported a 60.9% QoQ decline in the net profit to N86.9 billion in 3Q23 against N222.3 billion in 2Q23.

Market Reaction: Investor reaction to the robust 3Q23 results was positive as the stock jumped 2.27% to close at N36.00 versus a 0.51% gain for the All-Share Index (24/10).

Guaranty Trust Holding 3Q23 Earning Highlights

Source: FSDH, Company data