Infinity Trust Mortgage Bank Plc, an early bird on the third-quarter earnings report, shows an upbeat in the quarter that is expected to be the general pattern of corporate results for the season. The gradual reopening of the economy in the third quarter is expected to rekindle the second-quarter slowdown in corporate earnings generally.
For Infinity Trust Mortgage Bank, revenue gained momentum during the third quarter from the half-year position though the bank still ended the period with gross earnings down both quarter-on-quarter and year-on-year.
Management lowered operating expenses ahead of the drop in revenue over the same period and was able to turn the drop in gross earnings into strong growth in profit. The bank’s profit for the three months of the third quarter – at N117 million accounted for 42 percent of its closing profit figure at the end of the third quarter.
The biggest cost saving came from a sharp drop in the amortization of intangible assets by as much as 95 percent quarter-on-quarter. That provided the strength for the bank to cut total operating costs by over 23 percent compared to a 2.4 percent decline in net operating income over the period. A strong improvement in profit margin is a key strength the bank put up in the third quarter.
The gain in momentum in the third quarter gave a significant boost to the bank’s position year-on-year at the end of the third quarter in September 2020. Both revenue and profit still declined on a year-on-year basis though the upbeat in the third quarter reduced the margin of declines from the half-year marks.
A major challenge over the review period came from mismatching behaviours of interest income and expenses. While interest income –the main revenue line dropped by 6 percent to N716 million year-on-year at the end of September, interest expenses grew by close to 8 percent to N151 million.
The rising cost of funds caused a drop of over 9 percent in net interest income to N565 million year-on-year. Interest expenses also posed a big challenge last year at an increase of 69 percent to N190 million at the end of the preceding financial year.
Revenue losses affected all the other income lines of the bank, resulting in a drop of 12 percent in total operating income to slightly below N750 million. The drop was partly remedied by cost savings from credit loss and operating expenses.
The bank recorded no further credit loss expenses within the third quarter and that moderated the figure for the year so far relative to revenue compared to the half-year position. At N4 million at the end of the third quarter, loan impairment expenses were slightly down year-on-year.
However, the figure may see an upsurge in the final quarter, which has been the pattern since 2018. From N4.2 million credit loss expenses at the end of the third quarter of last year, the bank ended the year at N9 million.
There were two major changes in respect to operating expenses. The depreciation figure multiplied more than 16 times to over N64 million. This was countered by the amortization of intangible assets, which dropped from roughly N86 million in the same period last year to N4 million at the end of September 2020.
The strength of the bank last year came from the strong growth of 38 percent in revenue to N1.4 billion. That led to a 22 percent growth in after-tax profit to N400 million for the year. This year so far, revenue is headed downward for the first time in many years.
At the end of the third quarter in September 2020, gross earnings amounted to N901 million for Infinity Trust Mortgage Bank. This is a year-on-year decrease of 9.4 percent, slowing down from a 13 percent drop at half-year. The expectation is that the year-on-year revenue drop would follow the bank to the full year. This means the company is likely to record the first drop in years at the end of 2020.
All the bank’s income lines – interest and non-interest earnings pointed downwards at the end of the third quarter. Fee and commission income led to the decline in revenue with a drop of 32 percent year-on-year to N60 million at the end of September.
The strong profit improvement within the third quarter paled into insignificance somewhat on year-on-year performance. At N277 million at the end of the third quarter, after-tax profit went down by 5.5 percent over the period. Yet the strength from the third quarter performance helped the bank to reduce the margin of profit drop at half-year.
Profit margin is up at 30.8 percent at the end of the third quarter from 25.9 percent in the same period last year and from 28.9 percent at the end of 2019. The company earned below 8 kobo per share at the end of the third quarter, down from over 8 kobo per share in the same period last year. The company earned 10 kobo per share at the end of last year and paid out a cash dividend of 3.5 kobo per share to shareholders.
Comments are closed.