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Guaranty Trust Holding Company (GTCO) and Zenith Bank closed the first nine months of 2026 with almost similar pre-tax profits, but the numbers reveal two very different approaches to making money.
GTCO appears to be protecting its balance sheet, reducing lending exposure and keeping bad loans under control.
The trade-off is that rising funding costs are squeezing its core interest earnings.
Zenith, meanwhile, is expanding lending more aggressively and generating stronger fee income.
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But this growth is coming with an increase in loans already showing signs of credit deterioration.
For investors, that creates a choice between GTCO’s more conservative balance sheet at a higher valuation and Zenith’s stronger loan growth at a cheaper valuation but with greater credit risk.
GTCO trades credit risk for funding pressure
GTCO reported a pre-tax profit of N879.90 billion, down 2.3% from N900.80 billion a year earlier, while profit after tax declined 12.2% to N614.57 billion.
The weakness was not because GTCO was earning less interest.
- Total interest income increased about 5% to N1.29 trillion. The problem was the cost of generating that income.
- Interest expense jumped 27.7% to N356 billion, causing net interest income to fall 1.7% to N935.88 billion.
- Customer deposits were the biggest source of pressure, with interest paid on them rising to N325.25 billion from N228.18 billion, an increase of about 43%.
In simple terms, GTCO has more deposits, but those deposits are costing significantly more.
The group is also lending less. Net customer loans declined 4.1% from December to N3.00 trillion, while its investment securities stood at about N5.94 trillion.
- Only about N434.51 billion, or roughly one-third of GTCO’s N1.29 trillion interest income, came directly from customer loans. A much larger proportion was generated from cash placements and investment securities.
Management appears comfortable with that position.
Commenting on the results, Group CEO Segun Agbaje said the group remained focused on maintaining a “strong, liquid and well capitalised” balance sheet.
More importantly for investors, he said GTCO would continue to optimise risk-free returns and take advantage of market opportunities without compromising the quality of its risk assets.
That comment supports what the balance sheet already shows: GTCO is not chasing loan growth at the expense of credit quality.
- Non-performing loans declined to N123.16 billion from N160.30 billion, reducing the NPL ratio to roughly 4% from about 5% in December.
- Loan impairment charges also fell 58.4% to N29.02 billion.
Overall, that strategy helps reduce credit exposure, but it introduces another risk. If interest rates decline further, returns from securities can fall while deposit costs may take longer to adjust.
Zenith pushes harder into loans
Gross customer loans increased about 10.8% from December to N12.26 trillion, while customer deposits rose 11.4% to N27.11 trillion.
Customer lending remains central to its earnings. Interest earned from customer loans increased to N1.44 trillion, accounting for more than half of Zenith’s total interest income.
Management describes this expansion as deliberate.
Group Managing Director Adaora Umeoji said the nine-month performance reflected increasing contributions from “customer-driven business activities”, highlighting growth in lending, transaction volumes and customer deposits.
She also said lower funding and credit costs supported profitability and improved earnings quality.
The funding numbers support that point.
Although Zenith’s interest income fell 4.5% to N2.62 trillion, interest expense declined 15.4% to N688.73 billion.
- Its cost of funds fell to 3.5% from 4.5%, helping net interest income remain broadly flat at N1.93 trillion.
- Fee income provided another bright spot. Net fee and commission income increased 26.6% to N256.85 billion, supported by electronic banking, account maintenance, guarantees and letters of credit.
But there were weaknesses; trading income swung from a N277.65 billion gain to a N229.19 billion loss, while operating costs increased.
Zenith still managed to grow pre-tax profit 1.2% to N928.80 billion largely because impairment charges collapsed 70.5% to N230.77 billion. Read Zenith Bank’s 9M 2026 results
Loan growth brings another risk
The concern is that Zenith’s growing loan book is also carrying more credit-impaired loans.
- Stage 3 loans increased to approximately N600.56 billion from N422.41 billion in December, pushing their share of gross loans from around 3.8% to 4.9%.
There is some balance in that picture. Stage 2 loans, which have experienced increased credit risk but are not yet credit-impaired, fell significantly to N465.74 billion from N845.76 billion.
- Zenith also increased its allowance against Stage 3 loans to N450.42 billion, while its overall coverage ratio stood at 123.2% and capital adequacy at 24.5%.
Management says it remains focused on maintaining financial strength while pursuing growth.
Still, investors will want to see whether the increase in Stage 3 loans stabilises before concluding that the sharp reduction in impairment charges is sustainable.
Credit quality separates the two
This is where the contrast becomes sharper. GTCO’s non-performing loans fell to N123.16 billion from N160.30 billion, reducing the NPL ratio to about 4% from 5%.
Zenith moved in the opposite direction. Stage 3 loans increased to about N600.56 billion from N422.41 billion, pushing their share of gross loans to roughly 4.9% from 3.8%.
- There was some improvement further up the credit-risk ladder, with Zenith’s Stage 2 loans falling to N465.74 billion from N845.76 billion.
Still, the rise in Stage 3 loans means investors should be cautious about treating the 70% decline in impairment charges as evidence that credit risk has fully normalised.
Which stock looks cheaper?
Both stocks have delivered gains so far in 2026, although Zenith has clearly outperformed GTCO.
- Zenith was up 94.17% year-to-date at the end of October, despite falling 10.45% during the month.
- GTCO was up 33.30% year-to-date, after declining 8.41% in October.
That means Zenith has already delivered the stronger capital gain this year, yet it still looks cheaper on current valuation measures.
- At its October closing price of N120, Zenith traded at about 4.67 times September 2026 trailing earnings and around 0.97 times book value.
- GTCO, at N120.90, traded at about 5.52 times trailing earnings and 1.27 times book value.
Put simply, investors were paying more for each naira of GTCO’s earnings and shareholders’ funds than they were for Zenith’s, even though Zenith had already recorded the much stronger share-price gain.
- GTCO’s higher valuation can partly be linked to its cleaner loan book and more cautious approach to lending.
- Zenith offers stronger loan and fee growth at a lower valuation, but investors also have to consider the increase in credit-impaired loans.
For investors, the choice is therefore not simply about which stock is cheaper.
GTCO offers a more conservative balance sheet but at a higher valuation, while Zenith has delivered the stronger capital gain and still trades at a lower valuation.
Going into 2027, GTCO needs to bring down the cost of deposits, while Zenith needs to show that its expanding loan book can continue producing earnings without creating more bad loans.
