BusinessDay 29 Mar 2018

Thursday 29 March 2018
30 BUSINESS DAY
C002D5556
BD
Markets + Finance
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GTBank plc: Strong earnings growth
enhanced by growth in interest income
BALA AUGIE
Guaranty Trust Bank
(GTBank) Plc in its
audited financial
statement for the full
year 2017 recently
released showed an impressive
performance, as it was able to grow
profitability and other key financial
indicators despite operational challenges
arising as a result of macroeconomic
headwinds.
The Nigerian lender has utilized
the resources of shareholders
in generating higher profit than
any other bank in Africa’s largest
economy.
The Bank has kept up with its
regular dividend payment, and has
recommended a final total dividend
of N70.63 billion for the year (on the
basis of 245 per share).
Increase in interest income
largely driven by rise in non interest
income
For the year ended December
2017, GTBank’s gross interest income
increased by 25 percent to
N327.33 billion as against N262.49
billon as at December 2016; driven
by strong growth in fees and commission
income and improved and
non-interest income.
The growth in interest income
was driven by interest income on
short term government securities
and interest income on loans and
advances.
Net interest income surged by
80 percent to N234.50 billion in the
period under review from N130.86
billion as at December 2016; thanks
to a 81 percent decrease in loans and
impairment charges to N12.16 billion.
Net fees and commission income
was up 9 percent to N40.732
billion in December 2017 from
N35.94 billion the previous year.
The growth in fees and commission
income was driven by a
17 percent growth in volume of accounts
turnover, increase in volume
of e-banking transactions, which
was aided by the lender’s drive to
continuously create market leading
payment capabilities as well as
PBT (N’Bn
Return on Assets and Equity
Segun Agbaje, managing director, Guaranty Trust Bank
simple banking platforms for all its
customers.
Effective balance sheet management
underpins profit before
tax
GTBank’s profit before tax rose
by 21 percent to N200.24 billion
in December 2017 from N165.13
billion the previous year. Profit
after tax followed the same growth
trajectory as it grew by 29 percent to
N170.47 billion in the period under
review from N132.28 billion as at
December 2016.
The strong growth in profit was
driven largely by effective balance
sheet management; with impressive
returns from earning assets,
complemented by growth in Fees
and Commission income which
was strong enough to offset the
moderate growth in Cost of Funds
& Operating Expenses.
The 8.5 percent growth in
Operating expenses (OPEX) to
N123.30billion in the period under
review from N113.70 billion in 2016
was largely by increase in regulatory
cost in Nigeria and 11.1 percent
increase in personnel expenses to
N32.80 billion in December 2017
from N29.5 billion the previous
year owing to salary reviews done
in January 2017.
Improvement in asset position
fostered by high yield investment
Total assets increased by 8 percent
to N3.35 trillion in December
2017 from N 3.11 trillion as at December
2016.
Non-Performing Loans (NPLs)
Cost of Funds
increased to 7.66 percent in December
2017 from 3.66 percent as
at December 2016. The growth in
NPLs was brought on by exposure
to 9 mobile (formerly known as
Etisalat). Coverage for NPLS stood
at 119.6 percent, implying adequate
provision is in place for the entire
NPLs.The lender took a 30 percent
provision and may increase its provision
on the 9 mobile in anticipation
of any eventually.
Loans and advances to customers
fell by 9 percent to N1.45 trillion
in December 2017 from N1.59 trillion
as at December 2016. Loans
contracted due to cautious effort
to de-risk the balance sheet, repayment
of USD term loans and unwinding
of USD trade obligations.
Deposits from customers improved
by 1.42 percent to N2.14
trillion in December 2017 as against
N2.11 trillion as at December 2016
in-spite of customers’ utilisation of
Naira deposits.
Modest improvement in efficiency
and key ratios
The Nigerian lender has remained
efficient amid a tough and
unpredictable macroeconomic
environment as it Cost to income
Ratio (CIR) fell to all time low of
38.10 percent.
A lower CIR means a bank is
able to curtail costs while recoding
an improvement in profit.
Net interest margin (NIM)
increased to 10.40 percent in
December 2017 from 9.0 percent
the previous year; thanks to yield
optimization and modest growth
in cost of funds and reduced cost
of risk.
Asset yield grew to 14.30 percent
in the period under review
12.60 percent the previous year as
the Bank benefited from improved
average yield on fixed income securities
in 2017.
Return on average equity (ROAE)
increased to 30.10 in the period under
review from 28.80 percent the
previous year; driven by consistent
growth in profit. Return on average
assets (ROAA) moved to 5.27 percent
in December 2017 as against
4.69 percent as at December 2016.
GTBank closed the year with a
Basel II capital adequacy ratio of
25.68 percent and a liquidity ratio
of 47.56 percent, well ahead of 15
percent and 30 percent.
BD MARKETS + FINANCE (Business Team lead: PATRICK ATUANYA - Analysts: BALA AUGIE and LOLADE AKINMURELE)