Guaranty Trust gross earnings declines In First Half of 2025

Guaranty Trust gross earnings declined to N1.07trn in H1 2025, representing a 23.0% y/y decline from N1.39trn in H1 2024 due to a drag in non-interest income. For context, interest income rose 31.5% y/y to N812.4bn, driven by loan book growth (+19.0% year-to-date to N3.47trn) and higher securities holdings (+15.6% year-to-date to N4.79trn). However, funding pressures persisted, with interest expense climbing 42.5% y/y to N180.1bn on the back of a 15.3% year-to-date rise in interest-bearing liabilities. As a result, net interest margin compressed slightly by 23bps to 10.1%. Still, net interest income improved 28.6% y/y to N632.2bn. For FY 2025, we project funded income to come in at c. N1.41trn, representing 5.4% y/y growth (vs. N1.34trn in FY 2024). This outlook reflects the moderation in asset yields, given the downward trajectory of fixedincome rates, partly offset by sustained loan growth, which we expect to close the year at around 12% –15% y/y.

The Group’s non-interest income displayed mixed underlying trends. Fees and commissions rose 33.7% y/y to N135.2bn, supported by stronger e-banking revenues, higher transaction volumes, and asset management fees, while trading revenues grew 24.4% y/y to N37.9bn, benefitting from fixed-income trading activity. However, other income fell sharply by 82.7% y/y to N109.0bn, compared to N629.9bn in H1 2024, due to a 100.9% decline in unrealised fair value losses on financial instruments and a 91.6% dip in unrealised gains from forward transactions, due to relative Naira stability so far in 2025. As a result, noninterest revenue contribution weakened significantly to 26.3% from 54.7% in H1 2024. We expect fees and commissions to remain resilient at around N278.3bn–N307.6bn (vs. N221.2bn in FY 2024), supported by continued growth in digital transactions and electronic payment adoption. However, we anticipate trading income and FX-related gains to stay muted, given the relative stability in the Naira. As a result, non-interest revenue is projected to grow moderately to c. N496.4bn, compared to the sharp swing seen in 2024.

Operating expenses rose by 28.1% y/y to N258.5bn, reflecting higher personnel costs (+31.1% y/y), regulatory levies (+38.7% y/y), and general inflationary pressures, which drove the cost-to-income ratio up to 28.3% (vs. 16.1% in H1 2024). Loan impairment charges also increased 16.0% y/y to N55.0bn, in line with a higher NPL ratio of 4.5%, based on our estimates, (vs. 4.3% in H1 2024), reflecting cautious provisioning. Consequently, pre-provision operating profit declined 37.6% y/y to N655.9bn, and pre-tax profit dropped 40.1% y/y to N600.9bn. After accounting for a higher tax charge (+54.7% y/y), net profit fell sharply by 51.0% y/y to N441.3bn, translating into an EPS of N12.12 (vs. N24.71 in H1 2024). Return ratios weakened materially due to this, with ROAE declining 6,196bps to 31.5% and ROAA falling 926bps to 5.7%. Looking ahead, we expect operating expenses to rise by about 18% – 20% y/y in FY 2025, reflecting persistent inflationary pressures and higher regulatory levies, while loan loss provisioning could edge up in line with the uptick in the NPL ratio. Consequently, net profit growth will likely remain
constrained, with FY 2025 earnings projected to settle broadly around N818.4bn–N904.5bn

Guaranty Trust Interim Dividend

Despite the weaker bottom line, the Group proposed an interim dividend of N1.00/share, unchanged from H1 2024. The proposed dividend represents a dividend yield of 1.10% based on the stock’s closing price of N91.00 as of 24 September 2025.

Guaranty Trust Balance Sheet and Asset Quality

On the balance sheet, total assets grew 12.8% year-to-date to N16.69trn, supported by loan growth (+19.0% year-to-date to N3.47trn) and higher securities holdings (+15.6% year-to-date to N4.79trn). Customer deposits increased 18.6% year-to-date to N11.88trn, reinforcing a stable funding base, though long-term funding declined 31.8% year-to-date to N211.3bn. Asset quality showed a slight deterioration, with the NPL ratio rising to 4.5% from 4.3% in H1 2024, showing some pressures in loan performance, while the cost of risk also inched higher by 27bps to 3.4%, indicating higher provisioning requirements to cover likely emerging credit risks.

Recommendation

We have revised our fair value estimate for the ticker upward to N105.60 (previously N102.58), following adjustments to our blended valuation (FCFE, DDM, and Relative Valuation). This revision implies an upside potential of 16.0% from the stock’s closing price of N91.00 as of 24 September 2025, therefore we maintain a HOLD rating on the stock. SOURCE: CORONATION ASSET MANAGEMENT LIMITED