GT BANK HITS N120BN PROFIT, BEATS EXPECTATION, 2015 FULL-YEAR
Guaranty Trust Bank made
available its scorecard for the period ended September 30, 2016, to the
investing community after close of trading last Wednesday, earlier than the release date of the 2015 report.
The numbers released were
impressive and strong to beat market and analysts’ expectations. This was as a
result of the bank's professionalism and quality of asset management that has
continually re-positioned its brand before the banking public as the ICT-driven banking products and efficient
customer service delivery has supported its steady growth in terms of
profitability and returns to stakeholders.
Its strategic decision to
actively pursue retail banking with great innovation, including introduction of
convenience products that have boosted customers and deposit base with high
patronage. The bank has remained tall through all regulations and headwinds that
put the sector at its current position in Nigeria.
In the current financial
year despite the economic recession the ban's quarterly results have been
looking up with the support of forex revaluation gains.
The
performance ratios revealed improvement on those of the corresponding quarter
of last year, as top and bottom lines were up for the period under
consideration.
Specifically,
gross earnings rose by 44% from N229.37 billion in 2015 to N329.28 billion,
just as profitability level rose at a faster pace. Profit before tax was up 60%
to N120 billion from N75.16 billion in 2015. The numbers were also boosted by
Fx revaluation gain of N93.95 billion, a significant increase when compared to
the N6.96 billion recorded in 2015. There was a marginal decrease in cost of operation
for the period following which profit
margin for the period rose from 32.8% to 36.4%.
This
was also despite the huge increase in loan loss provision in the period as the
bank complied fully with the directive of the Central Bank of Nigeria (CBN) in
a bid to keep the loan books and balance sheet of Nigerian banks healthy and
clean, thereby avoiding the usual full-year shock and surprise to shareholders.
The
resulted in GTBank making a huge provision of N57.08 billion, as against N8.52
in 2015, representing 569.95 percent. The bank operation expenses margin for
the quarter dropped to 20.94%, up from 28.20% recorded in 2015.
Net
assets moved up to N492.20 billion from N400.67 billion in the corresponding
period of 2015. Its earnings per share (EPS) for the period went up to N4.07
from N2.55 in 2015 representing 59.56% growth.
The bank's improved earnings
power for the period under review resulted in the price in 1.91x, which is
lower than the 2.08x recorded in 2015.
The book value for the period stood at N16.72, up from 13.61 in 2015.
The improvement in profit margin compared to corresponding period is evidence
of cost management, despite the high provision that calls for more management
effort in the area of credit risk, just as loan to deposit ratio of 80.27% is
high on return to assets of 3.88%.
GTBANK BANK PLC
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NINE MONTHS
UNAUDITED RESULTS 2016
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COY
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2015
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2016
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(N)
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(N)
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% Chg
|
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Date Released
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October 21, 52015
|
October 19, 2016
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|
Price as@ Released Date
|
24.05
|
23.30
|
|
Gross Earnings
|
229,372,453,000
|
329,283,637,000
|
43.56
|
Profit After Tax
|
75,160,044,000
|
119,927,393,000
|
59.56
|
Shareholders' Fund
|
400,669,203,000
|
492,198,278,000
|
22.85
|
ESTIMATED RATIOS
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Earnings Per Share
|
2.55
|
4.07
|
59.56
|
PE Ratio
|
2.08
|
1.91
|
-8.17
|
Earnings Yield
|
16.06
|
17.49
|
8.90
|
Book Value
|
13.61
|
16.72
|
22.84
|
Price To Book
|
1.17
|
1.39
|
18.80
|
ROE (%)
|
18.76
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24.30
|
29.53
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Profit Margin
|
32.77
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36.42
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11.14
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Year End
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Dec
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Dec
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SOURCES: COMPANY DATA & INVESTDATA
RESEARCH
Investors,
on the other hand, were driven by value as the bank's strong numbers supported
its share price and consistent dividend have attracted all class of investors
to the stock as they take strategic positions to partake in the full year
dividend at the end of the current financial year.
Similarly, the book value has grown significantly in the last four years from N9.58 to N16.72. The investing community's confidence and earnings power supported its price as valuation tools placed the bank's stock at N35.
Technical
View
GUARANTY
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Share Holding Structure
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GT-Bank GDR (underlying Shares)
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11.50%
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Stanbic Nominees Nig. Ltd.
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22.33%
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Other Shareholders
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66.17%
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Other Statistics
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Shares Outstanding
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29,431,179,224
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Opening Price (2015)
|
25.18
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Closing Price as @ March 20th
2015)
|
18.18
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Closing Price as @ October 21, 2016
|
24.13
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Date Listed
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Sept. 1996
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Year End
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31st December
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GTB's management has demonstrated professionalism in managing a
world-class bank in every facet to ensure steady growth in terms of
profitability and dividend payment.
The bank's outstanding position in the pre-recession and in the ongoing recession season have reflected in the recent results that was boosted by its customer and deposit base with high patronage by the banking public has sustained it operation.
The bank remains strong in the industry as a result of solidified operations and branch networking through information technology-driven products and efficient customer service delivery.
The bank's outstanding position in the pre-recession and in the ongoing recession season have reflected in the recent results that was boosted by its customer and deposit base with high patronage by the banking public has sustained it operation.
The bank remains strong in the industry as a result of solidified operations and branch networking through information technology-driven products and efficient customer service delivery.
GTBANK BANK FOUR YEARS FINANCIAL PERFORMANCE
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2012
|
2013
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2014
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2015
|
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Date Released
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April 02 , 2013
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March 14, 2014
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March 05, 2015
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March 14, 2016
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Price @ Released Date
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24.93
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23.70
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22.03
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17.06
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Gross Earnings
|
223,064,885,000
|
242,665,011,000
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278,529,814,000
|
301,850,000,000
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Profit After Tax
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86,686,880,000
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90,023,977,000
|
94,434,000,000
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99,437,000,000
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Shareholders' Fund
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281,826,941,000
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332,353,070,000
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374,332,548,000
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413,562,000,000
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Dividend
|
1.55
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1.70
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1.75
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1.77
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SOURCES: COMPANY DATA & INVESTDATA
RESEARCH
Performance
The bank's giant strides were clearly revealed in the numbers posted in the past four years which shows that it has consistently enhanced its performance over the period as reflected in its profitability ratio within the review period. Gross income during the period grew by 35.32% from N223.06 billion in 2012 to N301.85 billion, while profit after tax (PAT) rose by 14.71% to N99.44billion from N86.69 billion posted in 2012.
The bank's giant strides were clearly revealed in the numbers posted in the past four years which shows that it has consistently enhanced its performance over the period as reflected in its profitability ratio within the review period. Gross income during the period grew by 35.32% from N223.06 billion in 2012 to N301.85 billion, while profit after tax (PAT) rose by 14.71% to N99.44billion from N86.69 billion posted in 2012.
The profitability level has steadily grown to support share price, placing the bank among the top three in terms of profitability, asset, margin, service delivery and risk management in the industry today. Under the period of four years, the risk and cost management of the bank improved tremendously as shown in its profit margin considering the changing business environment as it slipped to 32.94% from 38,86% in 2012.
The bank's prudent management in this harsh business climate led to enhanced shareholder value or net assets for this period. The nature and complexity of the risks in its business requires strong and robust risk management structures to provide adequate oversight at all levels.
The earnings power of the bank remained strong at N3.38, regardless of challenges confronting the industry such as the seeming over regulation, high Monetary Policy Rate, tight liquidity, falling crude oil price, dwindling external reserve and falling naira value at the exchange market.
The bank's 2015 full year EPS of N3.38 was beyond analysts and market expectations at a time non-performing loan resulting from the falling oil price was expected to impact negatively on banks' profitability at a time some operators in the industry had started posting negative or declining profit.
The bank’s
total assets per share and book value per share stood at N85.78 and N14.05
respectively.
GTBANK- ESTIMATED RATIOS
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2012
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2013
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2014
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2015
|
|
Earnings Per Share
|
2.95
|
3.06
|
3.21
|
3.38
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PE Ratio
|
8.46
|
7.75
|
6.87
|
5.05
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Earnings Yield (%)
|
11.81
|
12.91
|
14.56
|
19.80
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Book Value
|
9.58
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11.29
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12.72
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14.05
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ROE (%)
|
30.76
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27.09
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25.23
|
24.04
|
Profit Margin (%)
|
38.86
|
37.10
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33.91
|
32.84
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Year End
|
Dec
|
Dec
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Dec
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Dec
|
SOURCES: COMPANY DATA & INVESTDATA
RESEARCH
Valuation
We believe that future expectations validate any
projection, even as consistent growth in gross income and profitability on quarterly and yearly basis is our
central focus and positive outlook for
this bank stock. GTBank's
Price/Earnings Ratio stood at 5.05xs, with Price to Book Value ratio of 1.21
and Dividend Yield of 7.29%. Investors with medium and long term goals and
want to preserve capital should look the way of this stock.
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Our FY 2016
gross earnings forecast for GTBank is adjusted up on the strength of its Q3 to
N345.21 billion, representing a 22.79% improvement, relative to FY 2015, while
our net income estimate for FY 2016 is N106.21 billion and translates to a
21.52% improvement from FY 2015. This yields an EPS of N4.41 and a forward P/E
ratio of 2.68X. The banking sector still remains in the eye of the storm even
in 2016. We expect more loan loss provisions as oil price remains under
pressure in addition to the power sector's doubtful loans .
The pass
through effects of the implantation of the Treasury Single Account (TSA) is
still evident in the rising cost of borrowing and the pressure on net interest
margins. Our net book value estimate for FY 2016 is N500.20 billion, which
brings forward price to book value to 0.98X. We also expect marginally growths in both deposit from customers and Loan
Book for FY-2016, which means that the lender’s success in 2016 will be
determined by the efficiency of balance sheet deployment and the potency of its
risk assessment framework.
Analysts
Opinion/Recommendations
The shares
of GT Bank is overvalued considering its book value that narrowed the
margin of safety, but its consistent dividend payout has supported its share
price which is likely to remain for the FY 2016 estimates. The stock is
currently trading at a 45.05% discount to our fair value estimate of N35.
We
are mildly optimistic that despite the tight operating environment in Nigeria
with the implementation of the TSA policy by the Federal Government which
tightened the liquidity condition in the Nigerian financial system, the steep tank
in oil prices which posed a major threat to asset quality for most Nigerian
banks as a result of their exposures to the sector and the tight currency
control policies of the CBN which has weakened the earnings capacity of banks
in the country, GTB has the capacity to weather the storm as it has
demonstrated before now, especially with some of its investment in hard
currency through its Eurobond and others. This has reflected on its fx
revaluation gain.
Although we
expect major headwinds, at least all through the rest of the year, we are also
impressed with the continued growth of the bank’s Book Value position over the
last few years. However the bank must be proactive with its Return on Equity
(ROE) growth. We recommend BUY for now.
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