FSDH Initial Reaction: Guaranty Trust Holding 1Q24 results
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May 8, 2024/FSDH Research

Key Performance Highlights:

• In 1Q24, Guaranty Trust Holding reported a 330.4% YoY growth in gross earnings to N680.4 billion compared to N158.1 billion in 1Q23. The robust growth in gross earnings was powered by a 170.6% YoY growth in interest income (41.4% of total gross earnings) and a massive 29.7x YoY spike in Other Income to N324.9 billion. Moreover, the increase in gross earnings was supported by a 72.7% YoY jump in the fee & commission income(8.2% of total gross earnings), a 67.4% YoY increase in net gains on financial instruments held at FVPL (2.6% of total gross earnings). The bank recorded a 7.9x YoY surge in net profit to N457.1 billion in 1Q24.
   
• Interest Income surged 170.6% YoY to N281.7 billion in 1Q24, compared to N104.1 billion a year ago, primarily driven by higher Loans and advances to customers, cash and cash equivalents, and Investment securities. This was partially offset by a 147.9% YoY increase in Interest Expense to N54.4 billion as a result of a rise in customer deposits. The loan impairment charges shot up to N13.5 billion from N3.4 billion in 1Q23, resulting in a 171.7% YoY rise in Net Interest Income after loan impairment charges to N213.8 billion.
   
• The fee and commission income maintained robust momentum, with a 72.7% YoY spurt to N56.0 billion in 1Q24, driven by higher commissions, Account maintenance charges, and Asset management fees. With the fee and commission expenses increasing 50.0% YoY to N3.7 billion in 1Q24 due to higher bank charges and loan recovery expenses, the company reported a 74.5% YoY jump in the net fee & commission income to N52.3 billion in 1Q24 as compared to N30.0 billion in 1Q23. The net gains on financial instruments held at FVPL rose by 67.4% YoY in 1Q24 to N17.8 billion, mainly due to net foreign exchange realized trading gain. Other income surged 2886.0% YoY to N324.9 billion compared to N11.0 billion in 1Q23.
   
• On the other hand, personnel expenses increased 114.4% YoY to N22.3 billion due to higher wages, and the other operating expenses vaulted 73.7% YoY to N63.2 billion in 1Q24, primarily due to higher insurance premiums, AMCON expenses, communications, and technology-related costs. Consequently, the profit before tax rose 587.5% YoY to N509.3 billion in 1Q24 versus N74.1 billion in 1Q23. The effective tax rate was down to 10.3% in 1Q24 as against 21.5% in 1Q23, and the company reported a profit after tax of N457.1 billion, a 685.9% YoY jump compared to N58.2 billion in 1Q23. The earnings per share came in at N16.24/share in 1Q24 versus N2.04/share in 1Q23.
   
• Looking at the sequential performance, the gross earnings increased 102.4% QoQ to N680.4 billion in 1Q24. A 59.8% QoQ increase in interest income and a 46.7% QoQ rise in interest expense led to a 63.3% QoQ jump in net interest income to N227.3 billion in 1Q24. The net fee & commission income vaulted 93.9% QoQ in 1Q24 to N52.3 billion, while other income surged to N324.9 billion in 1Q24 from N94.1 billion in 4Q23, a 245.4% QoQ increase. The profit before tax stood at N509.3 billion in 1Q24, a significant 189.2% QoQ increase from N176.1 billion in 4Q23. Although the company paid an effective tax of 10.5% in 1Q24, compared to the effective tax rate of 2.2% in 4Q23, Guaranty Trust Holding reported a 165.4% QoQ rise in the profit to N457.1 billion in 1Q24 against N172.2 billion in 4Q23.

Market Reaction: The investor reaction to the 1Q24 results was positive as the Guaranty Trust Holding stock jumped 7.61% to close at N41.00 vs. a 0.89% fall in the All-Share Index on 6/5. However, the stock declined 5.98% to close at N38.55 vs. a 0.48% fall in the All-Share Index on 7/5.

Guaranty Trust Holding 1Q24 Earning Highlights

Source: FSDH, Company data