GTBank growth Profit Before Tax by 3.9% to close at N170.65bn

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The Management of Guaranty Trust Bank (GTBank) PLC has released its operational results of nine months in 2019 which showed an expansion in profitability, that translated to a profit before tax of 3.9 percent higher year on year that close at N170.65billion, while profit after tax follow the grew pattern by 3.4% to N146.99 billion, on account of a 7.4% y/y increase in tax expense. The results also translated to Return on Average Equity and Return on Average Assets ratios of 32.3% and 5.8%, respectively.

According to the bank recently released unaudited of nine months in 2019, which showed that the bank’s performance has not been adversely affected as of yet. The result was in line with expectations as gross earnings declined while profitability expanded moderately. The performance was underpinned by non-funded income growth, as interest income growth continues to lag the prior year.

 

The reports further shown an interest income declined by 5.6% to N224.19 billion as income from loans to customers declined by 6.3% to N134.47 billion. According to the report, notably all interest income generating lines were weaker year-on-year, save for income from cash and its equivalents, which up by 18.6% to N10.11 billion.

 

While interest expense also declined by 23.4% year on year to N32.63 billion which also further disclosed as the bank shed high cost deposits during the year that led to interest on deposits from customers to declined by 20.4% to N42.90 billion. While zero cost on debt securities relative to the prior year declined by N4.34 billion also contributed. Consequent on the higher pace of decline in expense relative to income, the bank’s net interest income settled higher by 1.3%.

 

Similar to many banks, the bank’s non-interest income growth has outpaced interest income growth, as non-funded income grew by 3.0% at N100.07 billion. This was supported by fees and commissions income which grew by 22.9% to N46.50 billion. Notably transaction volumes have continued to grow, supporting E-business income up by 63.1% to N11.04 billion, while credit related business charges up by 37.1% to N9.08 billion) have also boosted the bank.

 

Given the growth in non-funded income, which was enough to offset the decline in interest income, operating income grew by 1.6% higher year-on-year to N270.25 billion. Also, operating expenses declined by 2.2% to N99.60 billion, with declines across personnel costs decline by 2.9% to N27.30 billion and also AMCON levy declined by 5.0% to N15.49 billion supporting the moderation. Consequently, the bank’s cost-to-income ratio settled at 36.9% relative to 38.3% in the corresponding period of the prior year.

In our view, the bank’s macro-prudential ratios are above par, with only the non-performing loans ratio settling above the regulatory limit stood at 5.6% relative to 5.0% statutory limit, although it was noted of significant decline from 6.8% as at half results in 2019. The report indicated that all other ratios are settled well above regulatory minimums as follows: Liquidity ratio stood at 36.8% relative to 30.0%, Capital Adequacy soared to 28.1% relative to 16.0%, while the bank’s current reported loans to deposit ratio stood at 54.0% below 60.0% the new minimum LDR, despite loan growth settling at 9.4% relative to 1.1% in six months report.

 

In analysis the results, Cordros Research, said, this result is in line with our expectations, although the significant improvement in non-performing loans level, which can only in part, be explained by the expansion of the loan book, and is a welcome surprise. We expect the bank to post a stronger full year 2019 performance than represented here, as interest income growth accelerates moderately above the current run-rate in fourth quarter 2019, it added.


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