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Published On: Mon, Nov 20th, 2017

GTBank doubles stock value as investors go bullish

By OKEY ONYENWEAKU

GT Bank’s share price has doubled in the last one year, leading investors to grin satisfactorily as there gambit on the stock seems to have panned out. The stock’s price has risen from N24.00 in January 2017 to N43.00 as at November 17, 2017, creating a capital gains opportunity of 79.2 per cent before adjustment for fees. Analysts note that if a forward dividend yield of 5 per cent is added to the capital investment gains then a potential total yield of 84 per cent could be made during the course of the year.

While analysts agree that there has been a bullish surge in the equities market which has rubbed off on banking sector stocks, there is still some apprehension about the sustainability of the sectors performance given fears about the quality of short term bank assets. Indeed some bank insiders concede that many banks have had a torrid time keeping their loans and advances on the straight and narrow as borrowers have found their businesses come under severe pressure. The bust in the quality of bank loans has, however, not affected all banks equally; some banks appear to be doing better than others.

GT banks share price may perhaps reflect a greater market confidence in the quality of its assets and the stability of its operations. The bank advertises the highest share price amongst quoted banking establishments on the Nigerian Stock Exchange (NSE) with the exception of Stanbic IBTC which equally trades at N42.60 per share, both banks are well ahead of their nearest corporate rival Zenith Bank that sells for N24.12.

As the year continues to wind down, optimism has grown that the equity market will close the year on a positive note when compared to the corresponding period of last year when the market lost 6 per cent of its previous year’s value. The market itself, represented by the main board, the All Share Index (ASI), has appreciated 38 per cent year to date from 26,616.89 on January 3, 2017 to 36,703.58 on November 17, 2017. The market capitalization has also recorded hefty growth soaring by 39 per cent year to date.

The Nigerian economy, however, still struggles to sustain growth with high inflation recently retreating to 15.91 per cent, exchange rate volatility spinning between N360.00 and N365.00/1$ at the parallel market, and unemployment still towering at a lofty 36 per cent for young Nigerians between the ages of 16 and 39. However, the price of crude oil from which country gains 90 per cent of its revenue has spiked above the 2017 budget benchmark at $62.12 per barrel on November 17, 2017, production volume at over 2million appears to augur well for the country’s fiscal balance and could quickly close the nation’s fiscal gap. The government has opted to borrow $5.5 billion to fund this year’s budget deficit. Research by Afrinvest, IMF and Moody, suggests confidence in the country’s fiscal progress.

Despite the softness of the economy in the course of the year, G T Bank has emerged modestly strong in its third quarter financial results.

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Nigeria’s most capitalized commercial lender, reported a single digit upswing in profit-after-tax in the third quarter, buoyed by improved interest income and investment in securities.

The bank third quarter financial statement showed that its profit after tax (PAT) climbed 7.26 per cent to N125.58 billion from N117.08 billion in the comparable period of 2016.

GTBank interest income was up 36.48 per cent to N248.27 billion, influenced by 76.59 per cent growth in revenue from loans and advances to customers, though income from loans and advances to banks dropped -39.61 per cent during this period.

Improved earnings from treasury bills and foreign exchange also helped revenue from trading activities grow significantly by 229.78 per cent to N9.94 billion from N3.01 billion in Q 3 last year.

The lender’s performance was hampered by -21.29 per cent in its fees and commission income to N39.68 billion against N50.41 billion in Q3 2016, attributable largely to a whopping -60.58 per cent decline earnings from E-business.

GTBank made significant progress in cutting down its impairment provision, reducing it -85.36 per cent to N8.36 billion (Q3 2016: N57.08 billion).

Rising non-performing loans has been a major challenge in Nigeria’s banking industry as it has gone above the regulatory five per cent threshold when the country’s economy entered into recession in Q1 2016, following significant dip in crude oil prices.

The International Monetary Fund (IMF) had recently warned Nigeria over spiking NPLs in the financial sector.

Interest expense and personnel costs were up 19.41 per cent and 13.12 per cent respectively in Q3 2017, but expectedly, fees and commission expenses reduced -25.31 per cent during this period.

The Bank closed the third quarter ended September 2017 with Total Assets of ₦3.213trillion and Shareholders’ Funds of ₦581.91billion.

The Bank’s loan book contracted by 10 per cent from ₦1.590trillion recorded in December 2016 to ₦1.428trillion in September 2017 due to conscious effort to de-risk the balance sheet and unwinding (pay-down) of trade obligations.

In terms of asset quality, the Bank’s non-performing loans remained low at 3.93 per cent with adequate Coverage ratio of 212.7 per cent. Cost of risk moderated to 0.53 per cent from 3.66 per cent of comparative period of September 2016.  On the backdrop of this result, Post-Tax Return on Equity (ROE) and Post-Tax Return on Assets (ROA) stood at 30.81 per cent and 5.29 per cent respectively.

GTBank’s earnings per share came in at N7.25 much better than the N4.14 posted in Q3 2016.

 

Commenting on the Bank’s financial results, Segun Agbaje, the Managing Director/CEO said that, “given the progress we made in the first half of the year, we came into the second half with the objective of remaining focused on our core strategy of serving the full value chain of our customers’ needs whilst maintaining high standards of customer service.

He further stated that, “as the Bank continues to drive innovation around mobile technology, we will continue to enhance our digital channels in order to make it easy for our customers to use and access our products and services, whilst positioning our Bank as a platform for enriching lives that provides customers with benefits beyond banking.”

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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 is 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. Interestingly, reputable academic institutions such as Harvard Business School in United States of America(USA) and Crainfield Business School had carried out case studies 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 has not remained the same given the increased number of customers prompted by those migrating from weaker banks. This has put more pressure on its capacity to maintain its quality. In fact, there is a consensus that the bank’s effort to de-congest its banking halls is yet to yield much result.

 

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.

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.

Source: Bloomberg

 

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