GTCO’s Profits Dive 52% as Non-Core Income Crashes

Guaranty Trust Holding Company Plc (GTCO), long celebrated for its robust earnings power and efficient cost structure, has begun 2025 with a mixed report card. While it posted an industry-leading Earnings Per Share (EPS) of NGN7.84 for Q1-25, this marks a jarring 51.7% plunge from the NGN16.23 recorded in Q1-24 — a sobering reality check for stakeholders accustomed to GTCO’s stellar year-on-year performances.

The Q1-25 results highlight a dual narrative: strong core operations underpinned by improved credit creation and a solid 41.1% year-on-year growth in net interest income — yet weighed down significantly by declining non-core income. This sharp drop in profitability comes despite a resilient operating backdrop and prudent asset quality management.

Market analysts attribute the fall in EPS largely to the downturn in non-funded income. With the naira stabilising, fair value gains — a major booster in the previous period — dwindled sharply. The HoldCo’s forecasted 90.1% drop in foreign equity gains in 2025E tells the story of a bank adjusting to a new reality: limited windfalls from currency volatility and a pivot toward sustainable, interest-driven revenue.

Looking back, GTCO’s 2024 numbers were buoyed by exceptional non-core profits, including FX revaluation gains and equity mark-ups. But in Q1-25, the absence of such tailwinds, compounded by rising operating expenses (+17.9% y/y), has redefined the growth narrative. Operating income growth was sluggish at just 2.4%, and the cost-to-income ratio crept up to 25.7%, up from 24.1% in FY-24.

Despite this, the outlook is not entirely grim. Core earnings are expected to remain strong through 2025, with projected credit and investment securities growth of 32.0% and 36.9%, respectively. Analysts are also encouraged by a cleaner loan book. GTCO’s NPL ratio improved to 4.5% in Q1-25, down from 5.2% at the end of 2024, driven by write-offs and stabilisation in FX-induced impairments.

However, shareholders are bracing for diluted returns. The recent capital raise, which added 4.71 billion new shares, is expected to drag EPS down by 11.6% to NGN31.68 in 2025E. Consequently, analysts have revised the target price downward by 6.1% to NGN87.14/s from NGN92.77/s, citing valuation adjustments across DDM, GGM, and relative multiples.

Still, GTCO remains a “BUY” for long-term investors. With a projected final dividend of NGN9.20, the stock offers a healthy 13.5% yield at its last closing price of NGN68.00. At 2.98x P/E and 0.8x P/B on 2025E metrics, GTCO remains attractively priced compared to peers, albeit with a tempered growth outlook.

In reflection, Q1-25 serves as a stark reminder that even the most resilient institutions must adapt swiftly to changing macroeconomic dynamics. For GTCO, the message is clear: lean harder into core strength, navigate rising costs prudently, and innovate around non-interest income — or risk ceding its leadership mantle in a fast-evolving financial landscape.

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