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In a comprehensive report released recently by Renaissance Capital, a leading investment advisory firm, Guaranty Trust Bank plc was adjudged the bank that created the highest value for investors in 2012 out of the three Tier 1 banks considered. The other banks evaluated in the analysis include First bank of Nigeria and Zenith Bank.
After a review of the 2012 financial results of these tier 1 banks, the analysts commented that GTBank outperformed its peers delivering Return on Equity (RoE) of 34% against Zenith Bank’s 24% and First Bank’s 18%. GTBank’s superior returns were said to have been driven by better gross yield, a lower-than-peers impairment charge and a lower cost base. An Economic Value Added (EVA) analysis of the 2012 results of the banks to estimate the absolute naira value creation by each bank revealed that GTBank had the highest excess return at 16% with Zenith Bank and First Bank’s excess return put at 6% and 0.3% respectively.
The report further delved into the value created by the 3 banks since 2004, noting that GTBank only had a negative value creation in FY09 when its RoE fell to 13% but its peers fared worse in that year. The investment firm maintained that for four of the nine years under consideration, Zenith Bank and First Bank delivered negative value creation while only GTBank has created a positive value over the last 9 years.
The report concluded by recommending a BUY rating for GTBank based on the tangible value created over a period of time. The analysts believe GTBank is still the best entry point into the Nigerian market for long term investors seeking the best-in-class in terms of delivery which further justifies its premium rating.
The forecast for First Bank FY13 Profit After Tax (PAT) was lowered to N92bn from N97bn based on the bank’s lower Net Interest Margins; GTBank’s PAT expectation was raised marginally from N96bn to N97bn while Zenith Bank’s PAT forecast was lowered from N100bn to N97bn based on higher cost growth.
