Between Guaranty Trust and Zenith, which bank delivers better value?


The peer to peer analysis between Guaranty Trust Bank (GTBank) and Zenith Bank Plc reveals that both financial institutions are consistent with their tradition of good performance and rewarding investors.

Just 25 years after they were established, both Zenith and Guaranty Trust Banks have virtually been at each others jugular in a fierce but subtle contest for the leadership position of the banking industry in Nigeria.

Indeed, the two banks present very good case study of successful indigenous business organisation, particularly in the banking industry, in which more than a hundred of others have either closed down or were acquired by others.

Both banks have the fastest growth records in the industry, which has been driven largely by aggressive marketing push, customer service innovation and quality service delivery.

Q2 2015
Analysis of both banks’ half year reports for 2015 shows that Zenith Bank is well ahead of GTBank on growth in gross income at 24.1 percent in June 2015 compared to 15.05 percent.

GTBank and Zenith Banks financial indices
GTBank and Zenith Banks financial indices

GTB however is leading on net profit growth at 21.3 percent compared to Zenith Bank’s 12.09 percent. The two banks now occupies the topmost positions in the banking industry by profit, running neck-to-neck at the end of half year ended June, 2015.

Growth indicators suggest that Zenith Bank is expected to maintain the market share, while GTB is holding firmly to its position on the platform of profitability that appears unmatched in the banking industry.

In the first six months of 2015, GTBank traded with an asset base less than 66 percent of Zenith Bank’s, equity base that measures less than 70.4 percent of Zenith Bank’s and generated gross income that is 67 percent of Zenith Bank’s. Yet, it surpassed Zenith Bank by profit figure in the period.

On the average, people are likely to find four Zenith Bank’s retail outlets before they see one GTBank’s branch. However, despite the larger volume of business activity and the bigger resource outlay, both of them ended up with a bottom line that is virtually at par.

Corporate objectives however do not begin and end with profitability though the investor will always prefer to put in the minimum possible capital for a given rate of return. The strengths of the two financial institutions can therefore be examined in terms of ability to convert their assets into revenue and revenues into profit.

Financial Indices
Zenith Bank closed half year 2015 with gross earnings of N229.1 billion, which is an increase of 24.21 percent. The growth rate is above the 3.4 percent increase in asset base, which means an increase in asset turnover happened during the six months period. GTB on its own grew gross income by the lower margin of 15.05 percent to N153 billion during the first half of the year, which is ahead of the eight percent increase in total assets.

GT  and ZenithBanks financials
GT and ZenithBanks financials

Zenith Bank is therefore ahead of GTBank on asset turnover at 0.08 compared to 0.06 recorded by GT Bank. This means the Naira of assets produced more revenue at eight kobo for Zenith Bank than for GT Bank’s six kobo. This also implies that if Zenith operated with the volume of assets at the disposal of GTBank, it would have generated gross income in the region of N204 billion against the N153 billion posted by GTBank.

Revenue growth has slowed down over the past two years for the two banks, which is a reflection of the general industry pattern. Over the past five audited reports, Zenith Bank has grown gross earnings by an average of 20.4 percent, beating GTB’s five-year average revenue 16.1 percent.

Half year Interest income amounted to N176 billion for Zenith Bank in 2015 and accounted for 76.9 percent of gross earnings. For GTB, interest income grew by 14.2 percent in the half year to N113.9billion, representing 74.5 percent of gross income.

Both Zenith Bank and GT Bank generated an average of nine kobo of interest income per Naira of their portfolio of loans and advances.

Deposit Base
GTBank grew its deposit base ahead of Zenith Bank at 4.6 percent to N1.73 billion compared to Zenith Bank’s 2.7 percent growth to N2.6 billion in the first six months of year 2015.

GTBank and Zenith Banks financial indices
GTBank and Zenith Banks financial indices

However, Zenith Bank expanded loans and advances by 10.2 percent to N1.91 billion, beating GTB’s growth rate of 6.7 percent to N1.3 billion, but GTB deployed 75.3 percent of deposits into loans and advances, which is a comparatively more aggressive posture than Zenith Bank’s 73.5 percent.

The margin of differences in the banks’ cost-income ratios is higher with respect to operating cost. Cost to Income ratio stood at 68.6 percent for Zenith Bank, amounting to N156.9 billion in six months.
For GT Bank, total operating cost grew by 58.8 percent to N89.9 billion. This means that GTB used 59 kobo to generate a Naira of its gross income in half year 2015 while Zenith Bank used 69 kobo for the Naira of revenue.


The difference in cost margins accounts largely for marked differences also in profit margins and rates of return between them. This is where the significant difference in the banks’ cost-income relationships lies.

Net profit margin amounted to 35 percent for GTB in Q2 2015, a clear 12 points ahead of Zenith Bank’s net profit margin of 23 percent. The profit ratios mean that for every Naira of gross income, GTB converted 35 kobo into net profit for shareholders; Zenith Bank converted 23 kobo profit.

GTBank and Zenith Banks financial indices
GTBank and Zenith Banks financial indices

If GTB had Zenith Bank’s earnings volume, it would have generated a net profit of about N80 billion compared to the N53.1 billion of Zenith Bank for the Q2 2015. GTB, having a higher profit margin, is ahead on return on assets at 2.1 percent against Zenith Bank’s 1.4 percent.

It also beats Zenith Bank on return on equity at 13.8 percent against 9.73 percent for Zenith. GTB also ranks higher on earnings per share with N1.88 against N1.69 for Zenith Bank. Both GTB and Zenith bank paid out 25kobo per share as interim dividend for the second quarter of ongoing financial year ending December 2015.

Share Price Performance
GTBank’s share price performance on the NSE monitored showed that it has recorded a year-to-date decline of -8.98 percent from the N25.18 per share it was as at January 5, 2015, to N22.92 per share last trading day in the month of August 2015.

Similarly, Zenith Bank share price recorded a year-to-date decline of -6.7 percent, from N18 per share as at January 5, 2015, to N16.8 per share.

Future Outlook
The increases witnessed recently in the performance of the banks was as a result of more prudent management of their activities as against the previous activities of many of the banks. The banks have recently increased their gross earnings and drive for customer deposit in order to drive growth in non-interest income and profits.

Segun Agbaje of GTBank and Zenith MD, Peter Amangbo
Segun Agbaje of GTBank and Zenith MD, Peter Amangbo

The banking sector this year has witnessed severe monetary policies, especially from Central Bank of Nigeria (CBN), but despite the strains occasioned by policy measures, both banks stronger growth in profit may be reinforced in the ongoing year 2015.

The outlook indicates that with profit margin, GTB could take over the lead by profit in 2015. The neck-to-neck running on profit numbers by both banks in half year 2015 sends an important signal for the current year. GTB could take over the lead by profit in 2015, which it held until Zenith Bank made a 128 percent high profit jump in 2012.

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