Nigeria Banking Sector Coverage - December 2011 'Bad ... - Imara

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Financial Summary Income Statement Summary 2005 A 2006 A 2007 A 2008 A 2009 A 2010 A 2011 E 2012 E Net Interest Income Before Loss Provision 27 900 30 703 44 222 82 930 96 157 121 462 156 455 207 801 Y-o-Y Growth 10.0% 44.0% 87.5% 15.9% 26.3% 28.8% 32.8% Non Interest Income 20 800 26 697 28 584 38 576 31 869 56 461 71 836 86 147 Y-o-Y Growth 28.4% 7.1% 35.0% (17.4%) 77.2% 27.2% 19.9% Total Operating Income (incl Prov) 46 269 53 415 70 785 115 401 87 402 156 333 209 920 269 792 Y-o-Y Growth 15.4% 32.5% 63.0% (24.3%) 78.9% 34.3% 28.5% Operating Expense (29 461) (35 285) (46 915) (67 707) (75 841) (116 530) (139 194) (177 571) Y-o-Y Growth 19.8% 33.0% 44.3% 12.0% 53.7% 19.4% 27.6% Profit Before Tax 16 808 21 833 23 870 47 214 13 297 43 188 72 192 93 834 Y-o-Y Growth 29.9% 9.3% 97.8% (71.8%) 224.8% 67.2% 30.0% Attributable Net Income/Profit After Tax 13 050 17 383 18 652 36 540 4 901 33 411 55 944 72 715 Y-o-Y Growth 33.2% 7.3% 95.9% (86.6%) 581.7% 67.4% 30.0% Balance Sheet Summary 2005 A 2006 A 2007 A 2008 A 2009 A 2010 A 2011 E 2012 E Cash & Short term Funds 162 137 220 572 326 249 617 030 584 525 625 931 932 645 958 182 Y-o-Y Growth 36.0% 47.9% 89.1% (5.3%) 7.1% 49.0% 2.7% Financial Assets held for Trading 116 955 157 412 231 309 241 076 29 269 32 611 164 225 211 547 Y-o-Y Growth 34.6% 46.9% 4.2% (87.9%) 11.4% 403.6% 28.8% Loans & Advances,Net 125 022 179 004 221 038 469 670 1 089 287 1 151 195 1 277 967 1 516 099 Y-o-Y Growth 43.2% 23.5% 112.5% 131.9% 5.7% 11.0% 18.6% Deposits 332 196 449 238 685 353 855 306 1 519 853 1 598 853 2 266 437 2 577 213 Y-o-Y Growth 35.2% 52.6% 24.8% 77.7% 5.2% 41.8% 13.7% Borrowings - 22 101 29 414 35 473 124 617 118 386 112 467 Y-o-Y Growth NA NA 33.1% 20.6% 251.3% (5.0%) (5.0%) Shareholder's Equity 49 805 62 293 83 627 355 634 311 270 340 626 377 723 420 419 Y-o-Y Growth 25.1% 34.2% 325.3% (12.5%) 9.4% 10.9% 11.3% Per Share Data 2005 A 2006 A 2007 A 2008 A 2009 A 2010 A 2011 E 2012 E Earning per Share (kobo) 334.8 331.9 178.0 266.9 16.9 102.4 153.4 177.2 Y-o-Y Growth (0.9%) (46.4%) 49.9% (93.7%) 506.0% 49.8% 15.5% Dividend Per Share (kobo) 100.00 100.00 120.00 0.00 10.00 60.00 84.36 97.47 Y-o-Y Growth 0.0% 20.0% (100.0%) NA 500.0% 40.6% 15.5% Book Value Per Share (kobo) 1 259.8 1 189.3 798.2 2 597.6 1 073.0 1 043.8 1 028.9 1 018.0 Y-o-Y Growth (5.6%) (32.9%) 225.4% (58.7%) (2.7%) (1.4%) (1.1%) Tangible Book Value per share (kobo) 1 259.8 1 189.3 798.2 2 597.6 1 073.0 1 043.8 1 028.9 1 018.0 Y-o-Y Growth (5.6%) (32.9%) 225.4% (58.7%) (2.7%) (1.4%) (1.1%) Key Ratios 2005 A 2006 A 2007 A 2008 A 2009 A 2010 A 2011 E 2012 E Gross Loan to Deposit Ratio 49.1% 43.0% 33.3% 56.1% 75.8% 77.0% 60.3% 62.5% Gross Loan to Fund Ratio 49.1% 43.0% 32.3% 54.2% 74.1% 71.4% 57.3% 59.9% Net Interest Income to total income 60.3% 57.5% 62.5% 71.9% 110.0% 77.7% 74.5% 77.0% Cost to Income Ratio 60.5% 61.5% 64.4% 55.7% 59.2% 65.5% 61.0% 60.4% Interest Income to average interest earning assets 8.1% 7.9% 8.8% 10.4% 9.4% 8.2% 7.8% 8.4% Interest expense to average interest bearing liabilities 2.6% 2.6% 3.2% 4.2% 5.4% 3.2% 2.3% 2.6% Net Interest Spread 5.5% 5.3% 5.6% 6.2% 4.0% 5.0% 5.4% 5.8% Net Income Margin 28.2% 32.5% 26.4% 31.7% 5.6% 21.4% 26.7% 27.0% Accumulated Provision as a % of loans & Advances 22.2% 6.7% 2.1% 1.1% 5.5% 6.5% 5.1% 5.1% Return on Equity (average) 26.2% 31.0% 25.6% 16.6% 1.5% 10.3% 15.6% 18.2% Return on Assets (average) 2.8% 3.2% 2.4% 3.0% 0.3% 1.5% 2.1% 2.2% Non-interest income to total income 45.0% 50.0% 40.4% 33.4% 36.5% 36.1% 34.2% 31.9% Provision expense as a % of advances 0.6% 0.7% 0.9% 1.3% 3.5% 1.8% 1.6% 1.6% Advances to equity 251.0% 287.4% 264.3% 132.1% 349.9% 338.0% 338.3% 360.6% 20
EQUITY RESEARCH NIGERIA DECEMBER 2011 BANKING Guaranty Trust Bank plc (GTB) was incorporated as a limited liability company licensed to provide commercial and other banking services to the Nigerian public in 1990. The bank commenced operations in February 1991, and in September 1996, became a publicly quoted company. GTB undertook its second share offering in 2004 and successfully raised over NGN 11bn, ensuring it was satisfactorily poised to meet the NGN 25bn minimum capital base for banks introduced by the CBN in 2005. In 2007, the bank became the first Nigerian financial institution to undertake a USD 350m regulation S Eurobond issue and a USD 750m London listed GDR Offer. In December 2009, GTB successfully completed the first tranche of its USD 200m corporate bond. Along with the Nigerian operations, the bank has five offshore bank subsidiaries in the Gambia, Sierra Leone, Ghana, Liberia and in the UK. The group has a branch network of 186. • One of our preferred picks in the sector, GTB continues to perform well with consistent performance indicators. • After a relatively flat earnings growth performance in FY 09, attributable earnings for FY 10 were NGN 38.9bn, up 36.02%. This was largely due to a fall in provisions, however, as a flat revenue performance and rising costs impeded operating income growth. • Earnings for 9M 11 closed the period at NGN 40.5bn, an increase of 33.30%, boosted by extraordinary income. • All Zenon related exposures were settled with AMCON by the H1 11 results to June. • Using a DCF valuation, we arrive at a target price for GTB of NGN 19.34, representing 36.2% upside on its current share price of NGN 14.20. GTB remains our number one pick in the sector. Forward earnings and dividend yields add weight to our recommendation, justifying its premium relative ratings. BUY. Recommendation BUY Bloomberg Code GUARANTY:NL Current Price (NGN) 14.2 Current Price (USc) 8.8 Target Price (NGN) 19.3 Target Price (USc) 11.9 Upside (%) 36.2 Liquidity Market Cap (NGN m) 417 923 Shares (m) 29 431 Free Float (est. %) 82.3 Ave. daily vol ('000) - 1 yr. 19 989 Price Performance Price, 12 months ago (NGN) 13.2 Change (%) 7.9 Price, 6 months ago (NGN) 16.3 Change (%) (13.1) Financials (NGN m) 31 Dec F2010 2011F 2012F Loans & Advances 604 093 675 943 769 672 Net Interest Income (excl. Provisions) 83 853 96 872 134 825 Non-Interest Income 39 566 52 857 61 931 Attributable Earnings 38 890 52 630 69 300 EPS (kobo) 166.8 202.9 213.7 DPS (kobo) 100.0 121.7 128.2 NAV/Share (kobo) 944.6 991.3 933.5 Valuation Ratios Current 2011F 2012F Earnings Yield* (%) 11.7 14.3 15.0 Dividend Yield (%) 7.0 8.6 9.0 PE* (x) 8.5 7.9 6.0 PBV (x) 1.8 1.6 1.4 RoaA (%) 3.5 3.9 4.1 RoaE (%) 18.6 21.9 24.5 Net Interest Margin (%) 7.2 6.9 7.9 Cost to Income Ratio (%) 52.9 45.5 45.9 * - trailing 1.5 GT Bank vs NSE ASI ( Rebased) Strengths Weaknesses 1.4 1.3 1.2 Top tier bank IT driven Relatively small branch network compared to other top tier players 1.1 1 0.9 Strong brand Consistenly solid performance ratios Zenon exposure (AMCON should resolve) 0.8 0.7 0.6 0.5 17-Nov-10 17-Dec-10 17-Jan-11 17-Feb-11 17-Mar-11 17-Apr-11 17-May-11 17-Jun-11 17-Jul-11 17-Aug-11 17-Sep-11 17-Oct-11 17-Nov-11 Opportunities Threats SSA expansion Large oil & gas exposure, so negative Focused on top end of the market, so movement in oil prices could have large remaining market segments potential area impact on loans and advances GT Bank NSE ASI 21
Page 1 and 2: Nigeria Banking Sector Coverage - D
Page 3 and 4: Nigeria Banking Sector Overview Hav
Page 5 and 6: The breakdown, on a month-on-month
Page 7 and 8: EQUITY RESEARCH NIGERIA DECEMBER 20
Page 9 and 10: In its 9M 11 results to September,
Page 11 and 12: EQUITY RESEARCH PAN-AFRICAN DECEMBE
Page 13 and 14: In its 9M 11 results to September,
Page 17 and 18: FCMB’s 9M 11 results to September
Page 21: The 9M results to 30 September 2011
Page 25 and 26: The 9M results to 30 September 2011
Page 29 and 30: StanbicIBTC’s 9M 11 results to 30
Page 33 and 34: Interest income remained under pres
Page 37 and 38: For the 9M results to 30 September
Page 39: Imara Africa Securities (A division

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