Guaranty Trust Bank Nigeria (GTBank) Plc recently released its results for the year ended December 2018 which shows significant growth in key metrics.
The largest lender by market capitalization in Africa’s largest economy has the strongest profit margin among peer rivals while its cost efficiency and moderate operating expense growth has been adding impetus to bottom line.
Growth in non interest income adds strength to gross earnings
Gross earnings for the month of December 2018 increased by 3.70 percent to N434.70 billion as against N419.22 billion the previous year; the growth in revenue was a result of growth in non-interest income which compensated for the slight dip in interest income.
Interest income was up 39.01 percent to N127.4 billion in December 2018 as against N91.89 billion as at December 2017. A breakdown of non interest income showed fees and commission moved by 23.94 percent to N50.47 billion in the period under review as against N40.73 billion as at December 2017 while other income that comprise gains from foreign exchange trading increased by 34.12 percent to N37.63 billion in December 2018 from N37.63 billion the previous year.
However, interest income and similar charges were down 5.95 percent to N306.96 billion in the period under review from N327.33 billion as at December 2017.
The reduction in interest income was due to a low yield environment as yield on short term government securities has been growing at a slow pace since the start of 2018, but there has been an improvement in the money market in 2019, thanks to successful elections or benign political risk and Central Bank of Nigeria (CBN)’s Open Market Operations (OMO) and gradual economic recovery
Modest operating expenses bolster profit
Total expenses during the financial period 2018 increased by a mere 1.04 percent (lower than the 11.37 percent inflation) to N127.12 billion in December 2018 from N125.81 billion as at December 2017.
The moderation in total operating expenses was due to consistent application of cost optimization strategies by the Bank, as the outcome of the various cost initiatives adopted across the Group led to 180bps improvement in Cost to Income Ratio (CIR) from 37.09 percent in December 2018 from 38.89 percent as at December 2017.
The aforementioned moderation in operating costs greatly added to the company’s probability markers as profit before tax increased by 9.05 percent to N215.58 billion in December 2018 from N197.68 billion the previous year.
Profit after tax followed the same growth trajectory as it was up 10 percent to N184.64 billion in the period under review as against N167.91 billion as at December 2017
Sustained Competitive Margins amid headwinds
Guaranty Trust Bank (GTBank) Plc has turned a unit of Naira invested revenue into higher profit than any Nigerian lender while it has also utilized asset in generating higher returns than peer rivals.
For instance, GTBank recorded net profit margin of 42.50 percent as at December 2018, this compares with Access Bank’s 18.30 percent; Zenith Bank, 30.70 percent, and United Bank for Africa (UBA), 15.90 percent.
Also, GTBank recorded a return on average equity (ROAE) of 30.90 percent in the period under review, this compares with Access Bank’s 19.0 percent; Zenith, 23.70 percent, and UBA, 14.60 percent.
GTbank’s net interest margin dipped by 119 basis point to 9.23 percent in the period under review from 10.42 percent as at December 2017. The decline in NIM was due to declining asset yields.
GTBank’s total assets were down 2.10 percent to N3.28 trillion in December 2018 from N3.35 trillion the previous year. The decrease was caused by pay-downs by some foreign exchange loan customers on account of improved foreign liquidity in the market as well as impact of IFRS 9 implementation that saw a 12.92 percent decline in loans and advances to N1.26 trillion in December 2018 from N1.45 trillion the previous.
Improving Asset quality with very strong coverage for NPLs
GTBanks’s risk management and portfolio allocation strategy has paid off as evidenced in improved asset quality.
Non Performing Loans (NPLs) ratio improved to 7.30 percent in December 2018 from 7.7 percent December 2017. The 7.3 percent NPLs was as a result of the decision taken to classify 2 key names within the General Commerce, Construction and Real Estate Sectors under Stage3 (Life-time Credit Impaired).
In aggregate terms, the lender has adequate coverage of 105.1 percent for NPLs; this is consistent with the Bank’s maintenance of 100 percent coverage for its NPLs.
The Bank continued to have robust capital buffers as Capital Adequacy Ratio (CAR) of 23.4 percent is l well above the regulatory requirement of 16% percent, despite the global shocks resulting from transition to IFRS 9 Expected Credit Losses (ECL) from I AS39 Incurred Credit Losses (ICL).
Digital Banking and USSD Banking Performance
The ease and simplicity and the continuous introduction of new service offerings and upgrade of existing ones have been the major attraction for new and existing customers to the GTBank’s USSD (Unstructured Supplementary Service Data).
Continuous drive to grow the level of adoption of USSD has seen GTBank’s total USSD users grow to 4.6 million with 3.7 million of them reported as active users as at December 31, 2018.
Total number of USSD active users increased by 8.8 percent year on year (yoy) to 3.70 million in December 2018 from 3.4 million as at December 2017.
Total value of GTBank mobile banking increased by 55.05 percent to N5.83 billion in December 2018 from N3.76 billion in December 2017.Total volume of transaction was up 65.38 percent to 90.50 million in the period under review from 54.70 million the previous year.
On the other hand, total value of internet banking dipped by 33.36 percent to N2.17 billion in December 2018 from N3.27 billion as at December 2017.