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Published On: Mon, Mar 27th, 2017

GTBank dangles hefty returns

Okey Onyenweaku
Fighting a wicked decline in corporate fortunes in 2016, Nigeria’s largest bank by market capitalization, GT Bank Plc , pushed against the odds to deliver a stellar performance in the year. Swinging between the exponential growth in its burgeoning retail business and the broader thrust in its staple corporate banking activities, GT saw gross earnings rise by a thumping 37 per cent from N301.85billion in 2015 to N414.62 in 2016.
A review of Business Hallmarks survey of 10 market analysts showed thay eight of the analysts recommended the bank as a firm buy while two suggested that investors hold. The overwhelming bullishness of investors concerning GT is a counterpoise to the general weak enthusiasm for the stock market as a whole. Nigeria Stock Exchange’s All Shares Index (ASI) has dipped by -5.06 per cent year-to-date and about where it was a year earlier skimming slightly above 25,500.00 points. In contrast year-to-date GT Bank has seen share price rise by 8.5 per cent and year-on-year it has floated up by a stunning 86.88 per cent from N15.00 in April 2016 to a recent price of N26.80 per share.
According to Lanre Asiwaju, chief analyst at Brickhouse Investments, a private fund with over N500million under management, ‘GT is a cash flow toll gate. The bank has strong internal management processes, great brand equity and deep understanding of the local financial market, this is one stock you would want to have in your portfolio to counterbalance poor performance in other sectors. It is the king of the bulls’.
Witha recent indicated dividend yield of 7.46 per cent and over 30 per cent return from January to December 2016, the bank rewarded investors with a minimum combined rerurn of about 40 per cent or 22 per cent above recent a inflation rate of 17.78 per cent in February 2017. Notes Asiwaju, ‘the banks real return after adjusting for inflation is the stuff that makes investors glide on a cloud of pure joy’.
Indeed despite shrinking margins, the banks Profit before tax stood at a towering N165.14billion. This represented a growth of 37 per cent over N120.69billion posted in 2015, while profit after tax rose from N99.436 billion in 2015 to N132 billion.
A review of the bank’s loan book showed that it grew by 16 per cent from N1.373trillion in 2015 to N1.590 trillion in 2016, just as total deposits grew by 29 per cent to N2.111trillion from N1.637trillion in 2015.
Its total assets and contingents stood at N3.70 trillion and shareholders’ funds of N504.9 billion. GTBank’s non-performing loans remained low and within regulatory threshold at 3.66 per cent with adequate coverage of 131.79 per cent.
Further analysis reveals that the banks Capital base equally remains strong with capital a adequacy ratio (CAR) of 19.79 per cent, while it attained a return on average equity (ROAE) and return on average assets (ROAA) of 35.96 per cent and 5.85 per cent respectively.
The bank proposed a final dividend of 175 kobo, bringing total dividend to 200 kobo per share. The bank had earlier paid an interim dividend of 25 kobo.
Commenting on the financial results, the Managing Director/CEO of Guaranty Trust Bank plc, Mr. Segun Agbaje, said: “The bank’s financial performance in 2016, does not only reflect the resilience of our franchise, it demonstrates the fundamental strength of our businesses to deliver sustainable long-term growth. We successfully navigated the heightened economic uncertainty and regulatory headwinds which dominated the year to deliver a solid performance across all financial and non-financial indices.
He added: “We are transforming our organization into a platform for enriching lives by positioning ourselves at the centre of an extended ecosystem that offers our stakeholders, benefits beyond banking. We also remain committed to maximising shareholders’ value and delivering superior and sustainable return, guided by our founding values of hard work, discipline and integrity.”

In fact, GT Bank’s chief operating drivers seem to include a hefty growth in the retail arm of its business as agitated customers move from banks that they suspect to be ‘weak’ to banks that they consider ‘strong’ or at least stronger. The march to stronger institutions or flight to safety has resulted in a surge in deposit liabilities of banks like GT and has resulted in such banks witnessing a one-off ballooning of their operational profit. But in the third quarter of the year in particular GT made most of its cash from foreign exchange translation gains, in other words the bank made a huge non-repeatable gain from its foreign exchange trades.
Nevertheless, the financial service sector generally has been under severe pressure in 2016 as public policies such as the Treasury Single Account (TSA) and the reduction in expenditure thresholds for Ministries, Departments and Agencies (MDA’s) has led to lower public sector deposits thereby stalling the ease with which deposit money banks (DMB’s) could hitherto create credit. ‘The outlook for most banks in an era after the implementation of TSA seemed rather dark, but GT has like a magician pulling a hare out of a hat, defied logic, at least on the face of it’, says Rotimi Ogunwale, Senior Vice President of Imperial Finance and Securities. Ogunwale had noted that, ‘the banking sector was not likely to escape the consequences of broadly declining economic output, banks profit and loss accounts are going to get squashed in 2016, but as for GT the good news is that their earnings will stay strong, but how long the adrenaline will last is anybody’s guess’.
The bank however, rode on the back of its impressive performance in the third quarter of 2016 to solidify its year end result.
GT wrote up a hefty N93.6 billion revenue from forex revaluation gain in Q3 2016, representing a 1,282.3 per cent increase from N6.8 billion it raked in over and above the figures for the same period in 2015, making its ‘other income’ top line grow by 1,259.3 per cent to N94 billion in Q3 2016 as against N7billion in 2015.
Analysts believe this was a one-off gain that would not repeat itself in 2017.
The Central Bank of Nigeria after much pressure floated the naira in June this, which making it to crash from N197 it was pegged to N305 interbank market as at Friday, so, GT Bank which has huge forex reserves benefited immensely from this in Q3 2016.
GT Bank net income also went upped 10.5 per cent to N132.7 billion during this period instead of N120.1 billion it recorded in the same period last year.
At the same time, the lender’s net fee and commission income increased by 28.2 per cent to N48.1 billion in Q3 2016 against N37.5 billion in Q3 2015.

On the downside, the banks loan impairment charges ballooned by 426.1 per cent to N65.9 billion during the period being reviewed (Q4 2015: N12.408 billion), when its loans and advances to customers improved by just 16 per cent to N1.6 trillion during this time (Q4 2015: N1.4 trillion).
This was no mean performance given the inclement operating environment.

G T Bank Plc has been consistent in demonstrating its superiority over its peers in the banking industry. The bank, in fact, has sustained its position as the highest valued banking stock. Even though, the bears have a stronghold on the market, G T bank stock is trading at 51% higher than the stock of Stanbic IBTC which the second highest priced. The bank’s stock closed at N26.80 per share last Thursday, March 23, 2017.
As a result of its successes, many organizations have tried to model their operations after G T Bank. Its compact disposition appears to have yielded fruit. Some believe that the bank’s management style has even generated envy among its peers. Any time there is comparison among the banks, the argument tends to favour G T Bank more. This has truly mystified its operations and brand name over the years. Curiously, the reputable Harvard Business School in United States of America(USA) and Crainfield Business School had as a result carried out a deep research on the effectiveness and uniqueness of the G T brand.

Its modest success has shown that quality actually pays in the long-run. This may be the reason why the bank has run a modest, focused, tight and qualitative organization. In fact, the bank believes in doing its own thing rather than join the fray of aggressive competition that pervades the Nigerian banking industry.

From the early 1990’s the bank has tirelessly set the pace for other Nigerian financial institutions in terms of service quality, product functionality and excellent customer service. However, that quality of service may be waning now given the increased number of customers prompted by those migrating from the rescued banks. This has put more pressure on its capacity to maintain its quality.
‘’Sincerely, speaking I don’t know how G T Bank is going to tackle the problem of crowd in its branches,’’ fred Nwaogazi , a customer of G T Bank told BH.
Analysts have observed that G T Bank may need to support its operations with more and adequate infrastructure.
After listing at the stock exchange in 1996, it was the first Nigerian financial institution to undertake US$350million S Eurobond issue and a US$750million Global Depository Receipts (GDR) offer. The listing of the GDRs on the London Stock Exchange in July 2007 made the bank the first Nigerian Company and African Bank to attain such a landmark achievement.
G T Bank is one of the blue-chip companies on the Nigerian Stock Exchange. Many have earned a living by investing in the bank’s shares. The bank has been generous to its loyal share with impressive dividends.
It paid 28kobo in 2001; 75kobo in 2002; 95kobo in 2003; 70kobo in 2004; 45kobo in 2005; 70kobo in 2006; 75kobo in 2007; 70kobo in 2008; 100kobo in 2009 and 75kobo in 2010 in addition to bonus of 1 for 4. The bank also paid 125 kobo in 2011, 155kobo in 2012, 170 kobo in 2013, 175 kobo in 2014 and 177 kobo in 2015 and 200kobo in 2016.
‘’Let me confess to you. G T Bank results is good. The dividend it has paid is appreciated. It paid interim dividend of 25 kobo and a final dividend of 175 kobo. The bank has given us a sigh of relief given that the bank has given us what we cannot get from others , especially in this hard times’’, said Chief Timothy Adesinya, President Nigerian Shareholders Solidarity Association (NSSA).
However, many investors are futuristic about their investments and are not as comfortable that most of the banks revenue was forex induced which is one off.
Is there any magic to achieve this much in the next season without taking advantage of the forex revaluation.
This, notwithstanding, Managing Director, HIGHCAP Securities believes that is the best managed bank in the financial system today. That is why its stock commands a premium price. ‘’We know the bank is effective and efficient’’, Adonri said.
Retirement of DMD

Mrs Cathy Echeozo, deputy managing director, Guarantee Trust (GTB) has retired from the bank, having served the maximum three tenors of four years each on the board bank as prescribed by Code of Corporate Governance.
She was appointed deputy managing director of GTBank six years ago, having been executive director since 2005.
According to a release by the bank, during her term as executive director and managing director, Echeozo was in charge of corporate bank group and institutional banking division, where she performed creditably well.
The management of bank acknowledged her contributions to its success.
Mrs. Echeozo joined the Bank in 1993. She has worked in various units in the Bank such as treasury management, credit management, systems & control and institutional banking group. She was chairperson emerging issues sub-committee, on the committee of chief inspectors of all banks in Nigeria (1999-2000) and pioneered the bank’s entry into personal banking.
In fact, G T Bank many reckon will miss Mrs Echeozo whose corporate banking experience has been the major strength of the bank until most recently when it started cultivating the retail sector.
Interestingly, Mrs Echeozo’s contributions was absolutely major to the survival of the Iconic financial institution over the years.
However, there is subtle jitters not only among high net-worth investors but also senior staff of the bank over her exit. Would her replacement share vision, experience and heft which have helped to sustain the successes of the institution.
How will her exit affect the banks performance in future since the new person may try some new styles and not follow her pattern to the letter.
Nevertheless, G T Bank as focused and motivated it is, appears to have cultivated a winning streak which has sustained it over the time. In fact, the exit of Mrs. Echeozo who has left strong imprints all over the bank, would expose those who trained under and have been seeking for the opportunity to display their skills.

“GTB stands out in the Nigerian banking sector based on their ability to optimize their balance sheet and conservatively position themselves against any unforeseen shocks,” said Craig Metherell, an analyst at Avior Capital Markets Ltd. in Cape Town who has a buy recommendation on the stock. ( Noted in Bloomberg report of March 23, 2017)

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