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BusinessDay
Nigeria's leading finance and market intelligence news report.

GTBank generates higher returns to shareholders than any lender

Guaranty Trust Bank or GTBank has generated much higher returns for its shareholders than any other lender in the country, a stellar performance it has held for close to a decade.

That means the largest lender by market value in Africa’s largest economy knows what to do with its owners resources, and its cost control strategy has helped it stay afloat and maintain reasonable level of profitability in an ever challenging business climate.

GTBank’s return on average equity (ROAE) was 31.16 percent as at December 2019, as gleaned from its financial statement.

This means that every N100 of common shareholder’s equity earned about N31.16 this year.

GTBank’s returns compares with, Access Bank, (17.17 percent), FBHN, (10.67 percent), United Bank for Africa, (16.19); Zenith, (23.17 percent); Stanbic IBTC Holdings, (27.69 percen); Sterling Bank, (9.96 percent), Union Bank, (8.43 percent), and Wema Bank, (8.40 percent).

Banks future earnings growth hangs in the balance, thanks to stringent policies such as hike in minimum loans to deposit ratio to 65 percent as well as banning corporates and PFAs from participating in its Open Market Operation (OMO).

The recent earnings report showed profit is growing at a slow pace due to drop in interest income on loans and advances. Yields on short term government securities- a source of revenue- has been falling since the start of 2018.

To exacerbate the already anaemic position of financial institutions is the coronavirus pandemic that is hurting the economy.

Banks will be cautious of lending to the real sector so as to avoid rising non-performing loans, a dark reminder of 2016 when a sharp drop in oil prices paralyzed business activities.

According to the recently released data on the banking sector by the National Bureau of Statistics (NBS), banking sector credit to the economy grew for the second consecutive quarter by 5.8 percent quarter on quarter (q/q) in the fourth quarter  (Q4) 2019 to N17.2 trillion, the highest level since 2007.

Accordingly, credit growth rose significantly by 14 percent year on year (y/y) in 2019 compared to the decline of 4 percent in 2018.

Oil has slumped to around $30 a barrel, below the government’s $57 budget target, amid a price war between Saudi Arabia and Russia, and as widening global efforts to fight the spread of the coronavirus risks triggering a drop in demand.

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