GTBank hit with regulatory headwinds as H1 profit down 10%

Guarantee Trust Bank, Nigeria’s largest lender by market value, seems to be grappling with the regulatory headwinds caused by the Central Bank of Nigeria (CBN) tightening stance as 2014 half year profit fell 10 percent, analysis of the bank’s financial statement shows.

For the first six months through June 2014, the bank’s profit after tax shrank by 10 percent to N44.0 billion from N49.01 billion the same period of the corresponding year (HY) 2013.

GTBank joins other lenders like Fidelity Bank, FBN, Skye Bank, UBA, Union Bank, and s

Sterling Bank that had profits lowered by regulatory induced costs.

The apex bank had hiked cash reserve ratio on public sector funds from 12 percent to 75 percent, a move that was made to stabilise the naira and control inflation.

Additionally, the Asset Management Corporation of Nigeria (AMCON) levy on banks’ total assets is also eating deep into banks’ earnings.

Consequently, interest income increased by a single digit 8 percent to N99.1 billion in the period under review, while interest expense surged by 20 percent to N28.15 billion.

Gross earnings increased by a single digit 7 percent to N132.98 billion in HY 2014, against N124.20 billion as of HY 2013.

The effects of the aforementioned levies swelled costs as cost-to-income ratio, a measure of efficiency, increased to 48.58 percent in HY 2014, compared with N42.76 in the preceding year.

Furthermore, net margin, another measure of profitability and efficiency dropped to 33.08 percent as against 39.08 percent the preceding year.

However, some analysts say Nigeria lenders should come up with more innovative ways of taming costs through the use of technology.

Loans-to-deposit ratio reduced to 66.02 percent in 2014, compared with 69.0 percent in 2013, which means the bank is less aggressive about lending. Loans and advances increased slightly by 3 percent to N1.03 trillion in HY 2013, from N1.0 trillion the end of last year.

Deposits to customers were up by 8.33 percent to N1.56 trillion as against N1.44 trillion the preceding year.

GTBank, last year completed its 8.6 billion Kenyan shilling ($100m) acquisition of the East African nation’s Fina Bank Group after getting regulatory approval. The Return on Average Equity (ROaE) was 25.72 percent, while Return on Average Assets (ROaA) stood at 3.93 percent in the review period.

The bank’s share price closed at N28.88 on the floor of the Nigerian Stock Exchange, while market capitalisation was N849.97 billion.

Bala Augie