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Guaranty Trust Holding Company ,GTCO , tagged the Nigeria’s most efficient bank, is swiftly becoming a shadow of its former self ; the bank ,no doubt ,is losing its myth of invincibility for the monumental losses suffered by the bank’s stock in the last few years; the investors who are currently wriggling in agony due to their financial injuries have changed that perception ; to most of them ,GTCO is nothing but a fortune killer ;worst hit by this misfortune are those who borrowed to invest in the bank stock at N54 in 2018 who have lost billions of naira with bank’s share now selling miserably at N21 per share  .

This ,indeed, is But a twist of fortune for GTCO . Its business model is considered to be one that has been very difficult for a lot of Nigerian banks to replicate. The bank operates a low cost, revenue efficient model that relies less on manpower but more on prudent risk asset allocation while attracting cheap deposits. For most banks, some analysts believe ,it would  take years to replicate and possible billions spent in restructuring to achieve this.

This is longer the case . Without an end in sight , the bank continues to unleash misfortunes on its investors as its stock price depreciates further . GTCO closed its last trading day (Friday, June 17, 2022) at 21.05 NGN per share on the Nigerian Stock Exchange (NGX), recording a 2.1% drop from its previous closing price of 21.50 NGN. Guaranty Trust Holding began the year with a share price of 26.00 NGN but has since lost 19% off that price valuation, ranking it 143rd on the NGX in terms of year-to-date performance. Shareholders’ worries are compounded by the fact that GTCO has lost 12% of the stock’s value from May 19th to date.

The bank has lost more than N800b when compared with its market value in 2018 . At its peak on January 19, 2018, GTB was trading at N54 per share or a market capitalization of N1.5 trillion. A year later, the bubbles  burst as its share price nosedived sharply . During the Covid-19 bull ride of late 2020, GT Co shares recorded a resurgence after its share price rose to as high as N36 taking it to over N1 trillion. Moreover , GT Bank’s stock that was trading at N28 per share in the weeks leading to finally transforming to a holding company further deprecated . Since then ,its share price backtracked again ending the year 2021 with a 20% drop compared to the banking sector all share index which gained 10% during the year. In fact, the bank shares fell to a year low of N23.9 in December ,2021 before rallying to N26 in December .The slide continued this year with the share price falling to N25.45 by January 12th ,2022. 

Investors have been lukewarm towards the bank’s stock in Q1 2002, and most investors have kept the equity in their portfolios as a bulwark for stability rather than a catalyst for capital appreciation. The bank’s stock has generally moved along a mildly bullish channel with a flag pattern before dipping into a breakout at the beginning of Q2 2022. A sharp reversal occurred at the end of the first week of May before the stock reestablished a new but lower bullish run. Investors are not expecting a price breakout soon and have retained a “hold” position 

GTCO has lost its position as the most valuable bank on the Nigerian Stock Exchange .Zenith Bank first overtook GT Bank in terms of market valuation on November 19, 2021, when GTCo’s market cap fell to N747.5 billion compared to Zenith’s N753.5 billion. Since then, Zenith has risen past N800 billion while GT CO’s slide continues. GTCO market capitalization. Now stands at N619.4b compared  to N1.5trillion in 2018 , indicating the degree of havoc wrecked on its investors that bought its stock at N54.per share then . At 26% negative return , GTCO underperformed the  banking  industry which returned 0.9% and  the market which returned 16% over the past year

The misfortunes suffered by GTCO could be situated on its depreciating fundamentals in the last  two years . 2022 has proved to be a slow earnings burner for GTCO as its net earnings (Profit after tax) slipped by -5.15% from N45.55bn in Q1 2021 to N43.21bn in Q1 2021. Nigeria’s most cost-efficient bank appears to have fallen a few steps at the beginning of the year.  The bank’s problem was not with its net interest income, which grew by +9.10% from N52.43bn in 2021 to N57.20bn in 2022 but by a rise in its depreciation and other operating expenses. The banks’ depreciation expenses rose from N7.10bn in Q1 2021 to N8.95bn in Q1 2022, representing a rise of +26.20%. The group’s other expenses equally rose in the first quarter of 2022, leaping from N22.00bn in Q1 2021 to N29.31bn in Q1 2022, or by +33.23%.

 GTCO’s net interest income rose by +9.10% between Q1 2021 and Q1 2020. The rise in interest income while loans and advances fell by -4.68% suggests improved earning efficiency. 

The lending group’s loan impairment charges saw a downswing between Q1 2021 and Q1 2022; impairment charges fell by -35.05% Year-on-Year (Y-o-Y) from N1.86bn in Q1 2021 to N1.21bn in Q1 2022. The fall in impairment charges suggests an improvement in the group’s loan assets quality despite a decline in lending. 

The financial group’s depreciation and amortization charges rose by +26.15% Y-o-Y. Analysts suspect a reduction in fixed asset aging (from 28 years in Q1 2021 to 22 years in Q1 2022), generally leading to lower depreciation provisions. Still, GTCO’s provisions rose from N7.10bn in Q1 2021 to N8.96 in Q1 2022. 

 Profitability has been a slow-burning growth issue, as Q1 2022 profit before tax (PBT) grew by +1.12%. Investors have expressed disappointment at the slow growth in profitability, given the bank’s legendary commitment to low operating costs. GTCO’s PBT rose from N53.65bn in Q1 2021 to N54.29bn in Q1 2022.

The relatively flat profit growth appears to be the consequence of a +33.21% rise in other operating expenses and a +26.15% increase in depreciation and amortization. The surge in depreciation expense surprised analysts as the group’s fixed assets fell by -1.98% from N203.97bn in Q1 2021 to N199.92bn in Q1 2022. To further upset the profit apple cart, the bank’s deferred tax assets dropped by -75.31%, meaning that the lender has smaller tax shields to bolster its profit and loss statement in 2022.   

Analysts were mildly surprised by GTCO’s other expenses ballooning due to its annual generic cost-containment strategy. The banking group has consistently kept a tight lid over its cost-to-income ratio (CIR), thereby ensuring that it remains one of the lowest operating cost banks listed on the Nigerian Exchange Limited (NGX) 

Profit before tax (PBT) grew by +1.12% Y-o-Y from N53.68bn in Q1 2021 to N54.29bn in Q1 2022. The slow Y-o-Y pre-tax earnings growth remains a concern to shareholders, especially as the banking group has unlocked the industry’s low operating cost code by consistently being the lowest cost bank in the sector. 

Between Q1 2021 and Q1 2022, GTCO saw a drop in lending, with loans and advances to customers falling from N1.8trn in Q1 2021 to N1.7trn in Q1 2022. The fall in lending represented a -4.68% slide. Analysts have attributed the lending decline to a gradual fall in business growth, and lending opportunities as supply chain disruptions tighten, energy costs rise, and consumer demand shrinks on the heels of rising domestic prices.

GTCO’s customer deposit growth has flattened between Q1 2021 and Q1 2022, rising by a negligible +0.82%. The financial lender’s customer deposits grew from N4.01trn in Q1 2021 to N4.05trn in Q1 2022. The slow growth in customer deposits may reflect a milder economic and business growth rate than the last half-decade and falling real disposable incomes in Nigeria.

The group’s deferred tax assets declined by -75.31% between Q1 2021 and Q1 2022, suggesting a reduction in tax shields between 2021 and 2022. Deferred tax assets fell from N3.19bn in Q1 2021 to N0.79bn in Q1 2022. 

GTCO appeared to consciously reduce its borrowing costs between 2021 and 2022, with its other borrowed funds falling from N153.90bn in Q1 2021 and N107.09bn in Q1 2022, representing a fall of -34.42%.  

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