GTBank records profit growth amid tight regulatory environment

The most efficient lender in Africa largest economy, Nigeria, GTBank plc has once again overcome the economic headwinds bedevilling the sector by recording profit growth of 10 percent to end 2014 financial year.

For the year ended December 31, 2014, the bank’s profit after tax increased by 10 percent to N98.69 billion from N90.02 billion the same period of the corresponding year (FY) 2013.
Earnings per share (EPS) also increased by 10 percent to 347k in the review period from 317k the preceding year.

The impressive performance at the bottomline level, which is higher than the 8.2 percent January inflation rate is coming amid regulatory induced costs that have been eating deep into the profits of lenders.

One of such regulatory induce costs is the Banking Sector Resolution Cost Fund, otherwise called sinking fund, which was created by the Asset Management Corporation (AMCON) and mandates banks to pay 0.5 percent of their total assets to it on yearly basis.

Based on BusinessDay analysis, the Nigeria lender will be paying N10.50 billion AMCON charge in 2014.

In spite of the hike in interest by the Central Bank of Nigeria (CBN), GTBank was able to record a 15 percent increase in gross earnings to N278.52 billion in FY 2014, compared with N242.66 billion the preceding year while interest expense grew by 8 percent to N200.60 billion.

The CBN has increased benchmark interest rate to 13 percent from 12 percent, increasing it to 100 basis points, in order to stem losses to its foreign reserves and also defending the local currency that has been dropping as a result of fall in oil price.

GTBank was more aggressive about lending as loans to deposit ratio increased to 77.68 percent in 2014 from 69 percent as of December 2013.
Loans book also surged as loans and advances in the balance sheet jumped by 27 percent to N1.28 trillion compared with N1 trillion the preceding year,  as the lender sought to replace profits lost to higher cash reserve requirements (CRR), tighter monetary policy and regulation aimed at lowering fees and increasing competition.

The growth in loan book was driven primarily by growth of the foreign currency loan book on the back of the 2013 $400 million Eurobond issue.

Deposit by customers were up by 14 percent to N1.64 trillion in FY 2014, as against N1.44 trillion last year on the back of the bank’s retail franchise.

The audited financial statement also showed the GTBank had strong asset base as  total assets rose by 11.90 percent to N2.35 trillion in 2014 from in N2.10 trillion in 2013.

Cost to income ratio jumped by 0.57 basis point to 43.40 percent, which highlights the impact of the recent regulatory policies. Operating expenses were up by 15 percent to N94.21 billion compared with N82.42 billion as of December 2013.

There were many write offs in its books as loan loss expenses surged by 146 percent to N7.98 billion as against N2.88 billion the preceding year.

Cost-to-income remained low at 43 percent (0.12% increase Y-o-Y), as the industry’s cost leader is likely to maintain its cost efficiency ranking.

Return on average equity (ROAE) in the review period was 27.93 percent while the return on average asset (ROAA)  was  at 4.43 percent,  the highest in the entire banking industry

It also means the lender is generating high profits with the money shareholders have invested in it.

GTBank share price closed trading at N22.28 on the floor of the exchange, while market capitalisation was N748.38 billion.