EHIME ALEX, Lagos
Guaranty Trust Bank Plc’s first quarter 2020 unaudited earnings released on Wednesday has shown that the bank posted a 1.6 per cent growth year-on-year in profit after tax (PAT) to N50.07 billion, from N49.30 billion in the corresponding period of 2019.
This performance was largely supported by moderate growth in both interest and non-interest income, alongside industry-best efficiency.
The result indicates that the bank’s interest income grew by 3.4 per cent year-on-year in the review period to N77.04 billion, supported by 6.1 per cent growth or N2.67 billion in income from loans and advances to customers and 8.2 per cent or N2.20 in investment securities.
But, the interest income was negatively impacted by 97.7 per cent decline from loans to financial institutions, 57.3 per cent from cash, and 16.5 per cent from assets pledged as collateral.
Strong growth recorded in risk assets by 8.1 per cent year-to-date to N1.62 trillion, and investment securities positive by 10.3 per cent to N1.02 trillion were considered to be responsible for the acceleration in interest income from those lines.
On the other hand, interest expense pared by 21.6 per cent year-on-year to N12.75 billion, despite an increase in deposits by 9.4 per cent year-to-date to N2.77 trillion, as the bank has seemingly continued to improve it’s CASA (low-cost deposits: current and savings accounts) mix during the year, in the face of an expectation of soft interest income growth.
Consequent on the strong balance sheet management, net interest income growth was strong, expanding by 10.4 per cent year-on-year to N64.28 billion.
Non-interest income moderated in the period, settling 1.1 per cent year-on-year lower at N34.92 billion, with major lines recording declines save for gains from foreign exchange revaluation which grew by 220.3 per cent positive year-on-year at N8.45 billion.
While Net interest income may be weaker in the year, given revised charges and weaker transaction flows occasioned by the global pandemic. However, the positive impact of revaluation gain should more than offset the weaknesses in NII, Cordros Securities analysts said.
Given the growth in interest income, and despite the exponential growth in loan loss expenses of 87.8 per cent year-on-year to N1.22 billion, the bank recorded an expansion in operating income of 5.5 per cent or N5.11 billion year-on-year.
Operating expenses expanded by 10.9 per cent year-on-year to N39.77 billion, with the most pressure exerted by regulatory charges. AMCON levy increased by 11.2 per cent to N8.59 billion, while NDIC premium rose by 17.8 per cent to N2.38 billion.
Consequent on the OPEX growth relative to operating income growth, cost-to-income ratio (ex-LLE) settled higher at 40.6 per cent relative to 38.6 per cent in the corresponding period of the prior year.
As a result, profitability was stronger, with profit-before-tax settling 2.1 per cent or N1.22 billion higher year-on-year, while profit-after-tax settled 1.6 per cent or N764.22 million.
The bank proposed a final dividend of N2.50 per share, which translates to a dividend yield of 11.0 per cent based on the last closing price of N22.70 as of March 2, 2020.
Commenting on the bank’s earnings, Cordros Securities analysts said, “As expected the bank recorded a muted performance in Q1-20. From the numbers posted, we’ve started to see the impact of much increased risk asset creation, which has also affected LLEs. We expect pressure on that line in 2020, even without significant NPLs growth, given regulatory forbearance expected due to the impact of COVID-19 on the economy. Nonetheless, we expect the bank to record a decent performance in the year, supported by non-core earnings (FX revaluation gains). Our estimates are under review.”
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