Guaranty Trust Holding Company (GTCO) has delivered solid financial results for the fiscal year 2024, with expectations for a strong performance in 2025. The group’s core earnings are projected to grow 21.1% year-on-year (y/y), driven by a robust increase in credit creation (+20.8% y/y) and investment securities (+37.2% y/y). This performance is expected to offset any potential interest rate cuts throughout the year. However, non-core earnings are likely to face challenges as the stability of the naira limits foreign exchange gains, which accounted for a significant 64.2% of the group’s non-core income in 2024FY.
Despite the anticipated decline in non-core earnings, GTCO is poised to maintain a strong financial footing. The group’s capital adequacy ratio (CAR) has increased substantially to 39.3%, up from 21.9% in the previous fiscal year, bolstered by an impressive NGN910.08 billion in retained earnings. The excess capital is set to support key initiatives, including branch expansion, IT investments, and working capital needs, all aimed at driving future growth.
In light of these projections, GTCO has raised its target price by 27.3% to NGN92.77 per share (up from NGN72.85/s previously) and has maintained a “BUY” rating. This valuation is based on a blend of the Dividend Discount Model (DDM), Gordon Growth Model (GGM), and relative P/E and P/B valuation methods. The 2025E final dividend per share (DPS) is projected at NGN9.20, offering an attractive dividend yield of 13.5% based on the current share price of NGN68.00/s.
While core earnings are expected to remain strong, non-core income is projected to fall by 33.3% y/y, primarily due to a substantial decline in foreign equity gains (-73.9% y/y). Additionally, operational expenses (OPEX) are expected to rise by 15.1%, resulting in a cost-to-income ratio (CIR) of 27.0%. This combination of factors will lead to a slight 10.0% y/y decrease in earnings per share (EPS), which is forecasted to come in at NGN32.26 per share for 2025E. The decline in EPS is attributed to the dilutive effect of the issuance of an additional 4.71 billion shares as part of the company’s capital raise.
GTCO’s strong capital buffers and efficiency in operations have positioned it as one of Nigeria’s leading financial institutions. With a CIR of just 24.2% in 2024FY, the bank continues to maintain its spot as one of the most efficient lenders in the country. Shareholders can also look forward to a robust dividend yield, with a forecasted payout ratio of 28.5%.
- Dividend Yield: 13.5% based on the current share price of NGN68.00/s
With a fine balance between capital retention, strategic investments, and strong shareholder returns, GTCO remains an attractive investment opportunity, positioning itself for continued growth in 2025 and beyond.
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