GTCO maintains growth trajectory, PBT, assets, despite numerous challenges in macroeconomic environments
By Philemon Adedeji
Guaranty Trust Holding Company Plc (“GTCO” or the “Group”) in its Unaudited Consolidated and Separate Financial Statements for the period ended September 30, 2022, submitted to the Nigerian Exchange Group (NGX) and London Stock Exchange (LSE), still maintained growth trajectory across all key parameters such as Profit Before Tax (PBT), Profit After Tax (PAT), total assets despite challenges in macroeconomic environments.
Specifically, from the analysis of the results reveals that the group Gross earnings rose significantly nearly a 10.7 per cent year -on-year (Y-o-Y) to N380.98 billion in third quarter (Q3) 2022 from N344.16 billion in third quarter (Q3) 2021. With interest income and non-interest income contributing 19.2 per cent and 3.8 per cent respectively.
The growth in gross earnings means the rate of sale in Q3 2022 is more better than the rate of sale in the corresponding period.
The Group Profit before tax (PBT) reported stood at N169.7billion in Q3 2022, representing an increase of 11.7 per cent over N151.9 billion recorded in the corresponding period ended September 30th, 2021.
Profit after tax (PAT) grew by 0.7 per cent Year-on-Year to N130.35 billion in nine months of 2022 from N129.4 billion achieved in the preceding year, owing to the 74.9 per cent Year -on-Year increase in the income tax expense to N39.38 billion in nine months of 2022 from N22.51 billion in nine months of 2021.
Interest income grew by 19.2 per cent Year-on-Year to N232.49 billion, propelled by all contributory lines. Precisely, income from loans and advances to customers (13.2 per cent y/y to 159.87 billion), investment securities (26.1 per cent Year-on-Year to N62.93 billion), cash and balances with banks (151.0 per cent Year-on-Year to N9.67 billion), and loans and advances to banks (35.2 per cent Year-on-Year to N22.76 million) were the drivers of the growth recorded.
Similarly, interest expense increased by 33.4 per cent y/y to N42.80 billion on the back of higher fees expensed on customer deposits (+36.7 per cent y/y to N39.35 billion), financial institutions (+8.4 per cent y/y to N1.23 billion) and borrowings (+7.6 per cent y/y to N2.00 billion).
Despite an improvement in the HoldCo’s funding mix (CASA as at 9M-22: 86.6 per cent vs FY-21: 85.7 per cent), the higher cost on customers’ deposits was driven by the CBN’s revision of the minimum interest rates payable on local currency savings deposits from 10 per cent to 30 per cent of the Monetary Policy Rate (MPR). Accordingly, the HoldCo recorded a 16.4 per cent y/y increase in net interest income. Following lower charges for credit impairments (-38.3 per cent y/y), the net Interest income (ex-LLE) settled at N185.99 billion, translating to an 18.5 per cent year-on-year (Y-o-Y) growth.
The HoldCo reported a slight increase in its non-interest income (+3.8 per cent y/y to N123.18 billion) due to the (1) gains from FX trading (+43.2 per cent y/y to N31.71 billion) and investment securities trading (+36.6 per cent y/y to N4.91 billion) and (2) increase in net income from fees & commission (+12.5 per cent y/y to N58.31 billion). These were enough to offset the lower income from FX revaluation (-25.2 per cent y/y to N11.57 billion).
Operating expenses (OPEX) increased by 12.7 per cent y/y to N139.44 billion following the increases in deposit insurance premium (+21.1 per cent y/y to N10.74 billion), personnel expenses (+8.3 per cent y/y to N30.54 billion), and AMCON levy (+6.4 per cent y/y to N23.29 billion). Given that Operating expenses (OPEX) grew faster than operating income (+12.2 per cent y/y), the cost-to-income ratio (ex-LLE) settled at 45.1 per cent (9M-21: 44.9 per cent).
Earnings per share (EPS) recorded for the period under review increased marginally by 0.2 per cent to N4.55 in nine months of 2022 from N4.54 in nine months of 2021.
The Group’s loan book (net) increased by 2.2 per cent from N1.80 trillion recorded as at December 2021 to N1.84 trillion in September 2022, while deposit liabilities increased by 6.4 per cent from N4.13trillion in December 2021 to N4.39 trillion in September 2022
The Group’s balance sheet remained well structured and resilient with total assets closing at N5.81 trillion in nine months of 2022 from N5.44 trillion as of end of December 2021, reflecting an increase of 6.9 per cent.
In addition, the group total liabilities recorded for the period gained a 8.4 per cent increase to N4.935 trillion in Q3 2022 from N4.552 trillion achieved at the end of December 2021, but total equity declined by 1.2 per cent to N872.809 billion in nine months of 2022 from N883.227 billion as of end of December 2021.
Strong Capital Ratios and Asset Quality were sustained as CAR, NPL ratio, and Cost of Risk (COR) closed at 20.7 per cent, 5.6 per cent, and 0.2 per cent in September 2022 from 23.8 per cent, 6.0 per cent, and 0.5 per cent in December 2021, respectively.
The Vice president of Highcap security, David Andori said, The Q3 2022 performance of GTCO shows stagnation. Virtually no growth but also without any loss. Further analysis is needed to pin point the factors that stifled growth.
According to an analyst of Codoros Research, “We like that GTCO could keep its costs at bay, seeing as the cost-to-income ratio expanded marginally by 0.4 per cent amid the inflationary pressures in the operating environment. However, we are concerned about the HoldCo’s marginal growth in its non-funded income and will seek management clarity on this. For the rest of the year, we are optimistic that the HoldCo’s appetite for risky assets and the higher yields in the fixed-income market will support earnings. Although, as we highlighted in our H1-22 First Glance, the higher income tax expense incurred given the implementation of the 2021 Finance Act will continue to pressure the bank’s profitability.”
Commenting on the results, the Group Chief Executive Officer of Guaranty Trust Holding Company Plc (GTCO Plc), Mr. Segun Agbaje, said, “The Group’s 3rd quarter result reaffirms our strategy for long-term growth and underscores our capacity to deliver sustainable strong performance despite the volatilities in our operating environment.
“We have also kept in focus our vision of supporting small and medium enterprises specifically through our free business platforms to help them stay in business and expand their offerings. With our non-banking businesses fully operational alongside our core banking subsidiary, we are well positioned to maximise our earnings potential going into the 4th quarter of the year.”
He further stated, “In creating a thriving financial services ecosystem, our goal is to offer great experiences to all who interact with our brand whilst continually enhancing access to innovative financial solutions for individuals and businesses across Africa.
“We are appreciative of all our customers and other stakeholders who are with us on this journey of building a truly global African financial services institution.”
Overall, the Group continues to post one of the best metrics in the Nigerian Financial Services Industry in terms of key financial ratios i.e., Pre-Tax Return on Equity (ROAE) of 25.8 per cent, Pre-Tax Return on Assets (ROAA) of 4.0 per cent, Full Impact Capital Adequacy Ratio (CAR) of 20.7 per cent and Cost to Income ratio of 45.1 per cent.
GTCO Plc is a fully-fledged financial services group with banking operations across West and East Africa and the United Kingdom as well as non-banking businesses in several key industry segments including payment, funds management, and pension fund management.
With N5.8trillion in assets and over 28 million customers, the Group remains one of the most profitable and best-managed financial services companies out of Nigeria providing commercial banking services and non-banking financial services across eleven countries.
Its leadership in the banking industry and efforts at empowering people and communities have earned it many prestigious awards over the years including Best Banking Group in Nigeria and Most Innovative Bank in Nigeria at the 2022 World Finance Banking Awards.
It also retained its position as Africa’s Most Admired Financial Services Brand in the 2022 ranking of The Brand Africa 100.
