Analysis: Zenith looks cheaper, GTCO looks safer

Guaranty Trust Holding Company (GTCO) and Zenith Bank recorded nearly identical pre-tax profits for the first nine months of 2026, yet their strategies for generating income diverge significantly. GTCO appears to be safeguarding its balance sheet, curbing lending exposure and maintaining control over bad loans, while its funding costs are increasing and pressuring its core interest earnings.

Conversely, Zenith is aggressively expanding its lending and generating stronger fee income, but this growth is accompanied by a rise in loans displaying early signs of credit deterioration.

Investors face a decision between GTCO's more conservative balance sheet at a higher valuation and Zenith's stronger loan growth at a cheaper valuation but with elevated credit risk. GTCO reported a pre-tax profit of N879.90 billion, a 2.3% decline from N900.80 billion the previous year, while profit after tax fell 12.2% to N614.57 billion.

The decline was not due to reduced interest income, as the bank is earning less interest, but rather due to higher deposit costs and reduced lending. Net customer loans fell by 4.1% to N3.00 trillion, while investment securities stood at approximately N5.94 trillion. GTCO's management remains confident in this approach, maintaining a "strong, liquid and well-capitalized" balance sheet without compromising the quality of its risk assets.

Despite this strategy, GTCO is not seeking loan growth at the expense of credit quality, which helps reduce credit exposure but introduces another risk. If interest rates decline further, returns from securities could fall while deposit costs may take longer to adjust. Conversely, Zenith is growing its loan book more aggressively and generating stronger fee income, but this expansion is accompanied by an increase in loans already showing early signs of credit deterioration.

This strategy has resulted in a pre-tax profit of N928.80 billion, a 1.2% increase from the previous year. However, there are concerns about the growing loan book and its potential credit risks.