Fitch Ratings has affirmed Nigeria-based Guaranty Trust Holding Company Plc's (GTCO) and its core banking subsidiary Guaranty Trust Bank Limited's (GTB) Long-Term Issuer Default Ratings (IDRs) at 'B' with Stable Outlooks and National Long-Term Ratings at 'AA.

According to the ratings agency, the Long-Term IDRs of GTCO and GTB were driven by their standalone creditworthiness, as expressed by their Viability Ratings (VRs) of 'b'.

The VRs reflect the entities' exposure and sensitivity to the volatile Nigerian operating environment as well as the group's franchise strengths, solid profitability and strong capital buffers, which provide good loss-absorption capacity.

The VRs are one notch below the 'b+' implied VRs, reflecting the Operating Environment/Sovereign Rating Constraint.

“The National Ratings are driven by GTCO's and GTB's standalone strengths. They are at the higher end of the scale given GTCO's and GTB's strong business and financial profiles.”

Leading Banking Franchise

GTCO's business profile is underpinned by GTB's top-tier banking franchise, and a well-established and diverse business model.

GTB represented 99% of group assets at end-2021. The establishment of a holding company structure in 2021 enables GTCO to provide end-to-end financial services, enhancing its franchise.

Solid Profitability

GTCO's profitability remains strong and at the higher end of peers but was weaker in 2021 (operating profit/risk-weighted assets: 7.2%; 2020: 8.3%) due to lower yields on the securities book (end-2021: 24% of total assets).

The net interest margin contracted to 6.8% in 2021 (2020: 9%) despite loan growth.

Profitability remains supported by consistently low loan impairment charges and good cost control (cost/income ratio: 43% in 2021).

Capitalisation

Capitalisation is a relative strength with GTCO's Fitch Core Capital (FCC) ratio (end-2021: 28.2%), total capital adequacy ratio (25.4%) and tangible leverage ratio (15.9%) comparing favourably with peers.