GTBank is one of the third generation banks that has been classified into the category first tier banks out of the twenty five banks in Nigeria. This classification is based on capitalization. It is the sixth most capitalized bank behind Intercontinental bank, First bank, UBA, Oceanic bank and Zenith bank in that order.
They released their full year results for the period ending February 2008 and they are billed to release a 10-month results in December 2008 as their next year end. I will do an analysis of the results and draw a quick conclusion from it. I will do an in-depth job of it when I lay my hands on their annual report, which I am expecting as shareholder.
They increased their turnover by 62% from the previous year (February 2007) which led to a rise from N48.578 billion to N78.825 billion and the profit before tax also increased by 74% from N15.716 billion to N27.368 billion. Profit after tax grew by 60% N13.193 billion to N21.169 billion. They were obviously able to control costs as reflected in the rise in operations margin (74% as against 62%) but I am not too happy with the profit margin, which rose by just 60%. This was reflected in the massive increase in the tax they had to pay which rose by 145%. I will be able to get more details behind it when I get the annual report. They have proposed a dividend of 70K per share and a bonus issue of 1 for 11.
Based on this results their earning per share comes to 153K with 13.85 billion shares of this company in issue. Their price earning multiple is now 20.13x at the current price of N30.80. That goes to show that despite the fact that the market has been bearish and the share price of GTBank has been hit, it is currently trading at a higher value than most of its peers, which have an average price earning multiples of about 15 - 17x. The high multiple ratio would have been acceptable for me if they had been able to grow their profit margin by three digits.
This quick analysis shows that although GTBank can be considered a growth stock, there are other banks that have been able to grow their profit margins by over 100%. It means that the bank is gradually catching up with its marginal revenue. It still has room for expansion and diminishing returns have not set in but the growth rate is relatively slow and I think it is time for me to pull the plug off GTBank in my portfolio.
It is still possible for the price to rally but there is no fundamental justification for it to go beyond N33.66.