As the Nigerian banking sector continues to evolve amidst global economic challenges, two major players, GTCO and Zenith Bank, have reported impressive financial performances for the year ending December 31, 2024. These institutions have demonstrated resilience, growth, and robust financial strategies, making them attractive options for investors. However, the question remains: which of the two should investors prioritise for their portfolios? This report delves deep into a comparative analysis of both banks’ financial performance based on key financial metrics, offering recommendations and insights into their future investment potential.
- Total Assets: Zenith Bank’s Dominance
GTCO: N14.80 trillion
Zenith: N29.96 trillion
Zenith Bank’s total assets more than double those of GTCO, placing it in a position of dominance in terms of scale. A larger asset base typically translates to a greater capacity to generate income through loans, investments, and other financial operations. Zenith’s expansive asset size suggests a higher level of financial muscle, giving it a distinct advantage when it comes to withstanding economic shocks and seizing growth opportunities.
For investors, Zenith’s larger balance sheet provides a more diversified and secure foundation for long-term profitability. However, GTCO’s ability to manage and grow its assets efficiently, despite its smaller size, highlights its strength in generating value from a more focused asset base.
- Total Liabilities: A Natural Correlation with Asset Size
GTCO: N12.08 trillion
Zenith: N25.93 trillion
Total liabilities comprise customer deposits, borrowings, and other financial obligations. Given Zenith’s larger asset base, it follows naturally that its liabilities are also higher. This is typical of larger institutions, which manage more customer deposits and engage in more extensive borrowing activities.
For investors, the focus should not only be on the size of liabilities but also on how well the bank manages these obligations. While Zenith’s larger liabilities imply greater financial risk, its strong capital base allows it to manage these risks more effectively. GTCO, on the other hand, with its comparatively lower liabilities, demonstrates a more conservative approach to leveraging debt, potentially indicating lower financial risk.
- Shareholders’ Fund (Equity): Zenith’s Financial Resilience
GTCO: N2.71 trillion
Zenith: N4.03 trillion
Shareholders’ fund represents a bank’s net worth – the difference between total assets and total liabilities. It is an essential indicator of financial health and stability. Zenith’s equity of N4.03 trillion outstrips GTCO’s N2.71 trillion, signaling a stronger financial foundation. A higher equity base means that Zenith is better positioned to absorb losses in the event of economic downturns or financial disruptions.
For investors, Zenith’s higher equity signifies a more resilient institution, likely to offer greater long-term security. GTCO’s lower equity, however, might suggest a more efficient operation but can be a potential point of concern in times of financial stress.
- Profit After Tax (PAT): A Narrow Margin
GTCO: N1.01 trillion
Zenith: N1.03 trillion
Both GTCO and Zenith have reported strong profitability, with Zenith holding a slight edge in terms of absolute profit. Despite Zenith’s larger scale, GTCO has demonstrated remarkable efficiency by generating almost the same level of profit with fewer resources. This efficiency reflects GTCO’s effective cost management and operational strategies, which can translate into higher returns for investors in a more optimised environment.
For investors, this indicates that GTCO is a more efficient player, able to generate substantial returns with a leaner balance sheet. Zenith’s higher absolute profit, however, may appeal to those seeking stable and substantial earnings from a larger, more diversified institution.
- Earnings Per Share (EPS): GTCO’s Superior Value for Shareholders
GTCO: N35.44
Zenith: N32.87
Earnings Per Share (EPS) is a key metric for investors, reflecting the profitability attributable to each share in circulation. A higher EPS is indicative of more value being delivered to shareholders. GTCO leads Zenith in this regard, reporting an EPS of N35.44 compared to Zenith’s N32.87.
GTCO’s higher EPS suggests that the bank provides more profit relative to its share price, making it an attractive option for investors looking for higher returns per unit of investment. Although Zenith is larger and more profitable in absolute terms, GTCO’s better EPS reflects more efficient management of profits at the shareholder level.
- Dividend Declared: GTCO’s Higher Payout to Shareholders
GTCO: N8.07 (inclusive of interim dividend of N1.00)
Zenith: N5.00 (inclusive of interim dividend of N1.00)
Dividends are an important consideration for income-focused investors. GTCO has declared a higher dividend per share than Zenith, at N8.07 versus N5.00. This indicates that GTCO is prioritising rewarding its shareholders with a higher proportion of its profits, which can make it more attractive to dividend-seeking investors.
While Zenith’s dividend is lower, its larger asset base and stronger capital structure suggest that it might offer greater potential for capital appreciation over time, even if the current dividend is more conservative.
*Strengths and Key Considerations for Both Banks*
Zenith Bank:
Bigger Balance Sheet: Zenith has a significantly larger asset base, allowing it to engage in more extensive financial activities and providing greater stability.
Stronger Capital Base: A larger shareholders’ fund translates into better financial resilience and the ability to absorb shocks.
Slightly Higher Profit: Zenith’s larger scale enables it to generate higher absolute profits, making it a stable and secure long-term investment.
GTCO:
Efficiency: Despite its smaller size, GTCO has proven its ability to generate nearly the same level of profit, showcasing operational efficiency.
Higher EPS: GTCO delivers more value to its shareholders per unit of investment, making it attractive for those seeking higher returns on equity.
Conservative Debt Management: With lower liabilities relative to assets, GTCO appears to have a more cautious approach to financial leverage, reducing financial risk.
*Investor Recommendations and outlook*
Zenith Bank is well-suited for investors seeking stability, long-term growth, and more substantial absolute profits. Its larger asset base and equity position it as a more resilient institution, capable of weathering economic storms. For those looking for security and a well-established financial powerhouse with consistent growth, Zenith remains a top contender.
On the other hand, GTCO is an ideal choice for investors prioritising efficiency, higher returns on equity, and a more conservative approach to leveraging debt. GTCO’s higher EPS and more generous dividend payout make it an attractive choice for those focused on income generation and better value for each unit of investment.
*Outlook:*
For conservative, long-term investors looking for stability and security, Zenith Bank is the better choice due to its larger balance sheet, stronger capital base, and greater resilience.
For income-focused or efficiency-seeking investors who are looking for better returns per share and a more aggressive dividend payout, GTCO is an excellent option due to its higher EPS and efficient management.
Moreover, both banks present compelling investment cases, but the choice ultimately depends on the investor’s risk tolerance, investment horizon, and preference for growth versus income.
This was shared with Business Standards by Mr. Akin O’oreoluwaFatunke
