THE COMPANY: Guaranty Trust Bank (GTB ank), with its business spanning Anglophone West Africa and the UK, is one of the most respected and service-focused banks in Nigeria. The bank currently has shares outstanding of over N29.4bn ($188.2m), translating to a market capitalisation of over N400bn ($2.56bn). Its assets base has grown to about N1.6trn ($10.2bn), with a shareholders fund of over N235bn ($1.5bn). In 2007 the bank became the first Nigerian financial Institution to undertake a $350m Regulation S Eurobond issue and a $750m global depositary receipts (GDR) offer. GTB ank is rated B+ by Fitch and Standard & Poor’s, a reflection of the bank’s stability and reputation for strong asset quality and financial performance. GTB ank provides diversified financial services through 177 local branches, 627 automatic teller machines, international and subsidiary offices and the internet.

1Q12 RESULTS ANALYSIS: GTB ank is delivering growing returns, despite current challenges in the Nigerian banking industry. Management’s strategies for sustaining investment in innovative products has led to further market share gains. GTB ank saw robust growth in 1Q12 as asset yield earnings improved. Gross earnings grew 22% to N52.6bn ($336.6m), while net interest income came to N31.6bn ($202.2m), an impressive 37.5% growth year-on-year (y-o-y). Operating income reached N42.8bn ($273.9m) while pre- and post-tax profit increased to N24.4bn ($156.2m) and N19.3bn ($123.5m), respectively. Earnings and profitability were driven by growth in business volume, revenue and efficient cost management, and were backed by a higher yield atmosphere compared with 2011.

GTB ank is the most efficient bank among its peers. Costs were well managed in 1Q12 with cost-to-income ratio down to 43% from 49.5% in 1Q11. The bank has the lowest staff turnover rate, and is competitively managed at low cost. At 7.7%, GTB ank’s return on equity was better than both Zenith Bank and First Bank, which came in at 4.83% and 6.74%, respectively. The profits after taxes margin and profits before taxes margin both similarly overtook these competitors at 36.7% and 46.34%, respectively. Cost performances were largely driven by GTB ank’s continued push for higher cost efficiency. Efforts to grow its retail franchise through innovative e-banking solutions should lead earnings growth into meaningful margin expansions.

GTB ank’s loan book grew 5% y-o-y to N741.7bn ($4.7bn) while deposits came in flat at N1.06trn ($6.8bn).

Total impaired loans-and-advances to loans-and-advances ratio stood at 3.71% as the bank worked to improve its asset quality. The non-performing loan ratio in FY11 improved considerably due in part to loan recovery efforts and the sale of Zenon exposure to the Asset Management Corporation of Nigeria (AMCON). Total assets in 1Q12 fell slightly to N1.58trn ($10.1bn), while net assets grew 7.2% y-o-y to N250.8bn (1.6bn).

GTB ank remains focused on fully exploiting its lead in Nigeria’s financial services industry. A potential catalyst to GTB ank’s near-term growth will be an increased customer base from its sought-after e-banking platforms. Expansions across the West African sub-region are key drivers for earnings per share (EPS) and margin growth to drive up share prices. Trailing EPS stood at N1.79 ($0.01) while the price-equity ratio and book value per share (BVPS) remained 7.54x and N8.11 ($0.05), respectively. The BVPS compares with an increase of 40% in current market valuation. In the near term, however, investors will be focused on development progress of the entire banking sector, as well as the impacts of GTB ank’s discontinued businesses.

DEVELOPMENT STRATEGY: In line with the bank’s new focus to develop off-shore banking franchises, GTB ank launched its francophone West Africa expansion with the opening of its first branch in Côte d’Ivoire. The bank has established 22 e-branches with the aim of opening 76 such branches by the end of 2012. The bank is also posed to open 10 new full branches in 2012.

GTB ank remains a value-driven and defensively positioned investment, evidenced by the bank’s ability to continue delivering on its key broad financial goals.