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GUARANTY TRUST HOLDING COMPANY PLC FY'21 Earnings Release - Holdco maintains dividend payout

In its audited FY’21 released last Friday, GTCO reported a 2% y/y decline in Gross earnings to ₦447 billion (Vetiva: ₦423 billion). The drop was caused by an 11% fall in Interest Income to ₦267 billion, as the bank’s earnings from investment securities moderated 39% y/y. On the other hand, Interest Expense came in 2% lower y/y at ₦46 billion, thanks to a 52% drop in interest paid on borrowed funds which was caused by the repricing of some government facilities due to forbearance granted by the CBN as a result of the pandemic. All in, this led to a 13% y/y decline in Net Interest Income (NII) which came in at ₦221 billion, giving the bank a Net Interest Margin (NIM) of 6.3% by our estimate, a drop from the 8.8% reported in 2020.                                                          

The bank had more joy with their Non-Interest Revenue (NIR) which grew 13% y/y to ₦172 billion, thanks to a 39% y/y rise in fees and commissions, mainly driven by higher e-business and account-related fees. Conversely, the bank saw trading income fall by 12% y/y to ₦22 billion amid weaker trading volumes.                                                   

On the cost front, Provisions fell 56% y/y to ₦8.5 billion on stronger economic growth in H2, even as loans and advances grew 8% y/y to ₦1.8 trillion. Meanwhile, Opex jumped 11% y/y to ₦163 billion mainly on the back of higher AMCON charges (+27% y/y), leading to a higher Cost-to-income ratio of 41.4%, the highest seen since 2015 (42%). Overall, this caused a 7% y/y drop in PBT to ₦221 billion, while PAT came in 13% weaker y/y at ₦175 billion, yielding an EPS of ₦6.14 (FY’20: ₦7.11) and ROAE of 20.7% (FY’20: 27.1%). The bank also declared a final dividend of ₦2.70/share, in line with our expectations and level with FY’20.