In the first half (H1) of 2024, GTCO Holdings’ unrealised gains hit about N619.3 billion, representing 62 percent of the group’s N1 trillion pre-tax profit posted.
According to BusinessDay’s analysis of the holding company’s audited financial statements for the period ending June 30, 2024, the group recorded other income of N630.3 billion during the period. However, the ‘other income’ item featured an unrealised gain of N493 billion on financial instruments and a N130.2 billion unrealised gain on forward transactions. The group, however, posted a N3.9 billion unrealised loss on the FX revaluation.
Within the banking scope, unrealised gains refer to the increase in the value of the bank’s financial assets such as forwards, securities, derivatives, investments, among others that have not yet been sold or settled. They are unrealised because the bank has conducted a transaction to convert them into actual cash.
In GTCO’s income statements, it was noted that in the H1 GTCO gross earnings of N1.39 trillion, with a pre-tax profit of N1 trillion, net income stood at N905.6 billion during the six months.
During the period under review, GTCO posted a net interest income of N444 billion, which indicated a 370 percent year-on-year growth from the N94.5 billion net interest income posted in the first half of 2023. The group also posted a net fee and commission income of N101 billion, which was 96 percent more than the N51.5 billion posted in H1 2023.
Despite posting a net interest and non-interest income of N545 billion during the half-year, the bulk of the group’s reported income came from the unrealised fair value gain on financial instruments.
Letters of credit, bonds and guarantees make up these financial instruments
A review of the revenue generated from the group’s operating segment shows that a segment classified as ‘contingents’ was responsible for about N792.6 billion, or 57 percent of the group’s total gross earnings during the half-year.
According to side notes in the report, these contingents are related to bonds and guarantees as well as letters of credit. These bonds refer to liabilities incurred by the bank on behalf of its customers, with the promise that the customer will fulfil their part of a deal with a third party. If the customer falters on their part of the deal, the bank pays the compensation.
A review of the statements shows that GTCO had amassed liabilities of about N815.3 billion from transaction-related bonds, guarantees, and other short commitments.
3.25% dividend payout ratio
As part of its impressive performance during the period under review, GTCO Holdings announced an interim dividend of N1 per share, amounting to a dividend payout of N29.4 billion. This represents a dividend payout ratio of 3.25 percent based on its net income of N905.6 billion.
Although this represents GTCO’s largest-ever interim dividend payout, it also represents its smallest-ever dividend payout ratio. This paradox is majorly driven by the amount of unrealised gains accounted for in the group’s net income.
This phenomenon is also observed with Zenith Bank, which posted a net income of N578 billion, its highest-ever earning in six months. With its high earnings also came high interim dividends as the bank proposed a dividend of N1 per share, amounting to a payout of N31.4 billion. Just like GTCO, this represents its highest-ever interim dividend payout.
Even though a major part of the GTCO’s gains were unrealised, it doesn’t negate the impressive performance of the group during the half year.
As of June 30, 2024, the group recorded customer deposits totalling about N884.7 billion, marking a 103 percent year-on-year growth from the N435.8 billion customer deposits recorded at the end of June 2023. The group grew its loan book by 25 percent during the year to N3.1 trillion, from N2.48 trillion at the start of the year.
Having recording growth in its loan book, the bank also reported growth in its payment. During the half-year, GTCO received N545.5 billion in interest payments, which was 209 percent greater than the N176.7 billion reported in interest payments in H1 2023.
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