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At its full year 2018 analysts conference call and our follow up engagement, management guided to a 10% growth in loans over 2019, with focus on oil & gas sector, retail clients and manufacturing sector. Further, they guided that submissions have been made to unlock funds from the differentiated cash reserve ratio introduced by the MPC and awaiting approvals by the apex bank. Leveraging its retail presence, management expects 12% growth in deposit, 40% cost to income ratio, 9% net interest margin (NIM), and cost of risk and NPL ratio (coverage ratio above 100%) of below 1% and 5% respectively. Overall, management guided to PBT growth of 2% to N220 billion (8% YoY in FY 18).

We maintain our STRONG BUY rating on GUARANTY with a revised FVE of N49.66/share. GUARANTY trades at a FY 19E P/B of 2.1x, at a premium to ZENITH of 1.4x, which is justified given its strong and sustainable ROE. At current price, our expected dividend of N2.82 over FY 19E translates to a dividend yield of 8% (Zenith: 13.6%).

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