Analysts Bullish on Guaranty Trust Bank Shares, Projects 60% Upside

Investment and market analysts have said an upside over 60 per cent exists for investors buying the shares of Guaranty Trust Bank Plc at the current price. GTBank recently reported a profit after tax of N99.1 billion and recommended a dividend of 30 kobo per share for the half year ended June 30, 2019.

After assessing the results, analysts at WSTC Securities Limited said the shares of the bank are undervalued and have projected earnings per share (EPS) of N6.46 at the end of the year.

According to them, they expect earnings of GTBank to be driven by non-interest income in second half (H2) of 2019, following its continued drive to expand its digital banking platform. “Although the declining yields environment took its toll on GTBank’s earning, we expect to see an improvement in yields in H2’19. We expect a relatively higher yield environment in H2’19. Following the pressures in the external reserves, coupled with significant Open Market Operations (OMO) maturities in coming months, we believe that a rebound in yields direction is very likely, which will support the group’s income. We also expect to see an improvement in loan book, following the recent Central Bank of Nigeria (CBN)’s directive that banks are mandated to maintain a minimum of 60 per cent loan to deposit ratio. According to the management, the strategy is to grow the loan book via retail credit,” the analysts said. In arriving at the their projection, they said they used a blend of Dividend Discount Model and Residual Income Model to arrive at their fair value estimate. We adjusted our valuation inputs such as beta and the risk-free rate, to arrive at a fair value of N45.17 for GTBank. We believe that the stock is undervalued relative to its current stock price of N28. Consequently, we recommend a buy,” they said.