Guaranty Trust Holding Company [GTCO] Plc maintained increased momentum on the earnings track through the second half – during which a greater part of its N174.8 billion after-tax profit for the year was earned.
With a strong final quarter reinforcing a third-quarter upswing, the second half contributed over N95 billion or roughly 55 per cent of the group’s full-year profit. The stronger finishing for the year raises hopes for improved performance in the current financial year.
Group chief executive officer of the financial holding company, Segun Agbaje, said the bank’s performance in the year is despite the challenges in the business space and shifting economic conditions under which the bank traded.
He attributed the bank’s performance despite the operating difficulties to continued effort in exploring new ways to connect with customers and empower communities by offering greater and more rewarding experiences.
“Our performance reflects the strength of our franchise and underscores our ability to deliver long-term value for our stakeholders despite the challenges in the business environment and shifting economic conditions”, Agbaje said in a press statement on the full-year operating results.
The operating strength of the bank in the second half came from cost savings on all the major expense lines as well as improvements in non-interest earnings. Cost reductions were led by a sharp drop of 62 per cent in loan impairment expenses in the third quarter, culminating in a drop of 56.4 per cent to N8.5 billion at full year.
The bank’s management was able to slash loan impairment charges that much in a difficult operating season and despite an increase of N140 billion in the group’s net customer lending position to ₦1.8 trillion.
This is the high point of the bank’s performance in 2021 – which is a major positive change of direction from close to a 300 per cent upsurge in loan impairment expenses in the preceding financial year.
The reduction in credit losses afforded the bank a cost-saving that helped to temper the effect of revenue challenges it faced in interest income- the main revenue line in the year.
Other cost reductions in the year include a slight decline in interest expenses to about N46 billion at the end of the year. This is against an expansion of 14.4 per cent in deposit liabilities, which stood at over ₦4 trillion at full year.
This indicates a significant reduction in the bank’s average cost of funds in the year.
The third major cost-saving area for the bank is personnel expenses, which went down by 11 per cent to N33.4 billion. Also, depreciation in respect of the right of use assets, which amounted to over N2 billion in the prior financial year, dropped to zero in 2021.
Some operating strength came from the revenue side as well. Fee and commission income grew by 39.4 per cent to N74 billion at the end of the year. Other income also grew by 10 per cent to N84.4 billion over the review period.
This provided the spur for non-interest income, which rose by 17 per cent to N181 billion at the end of the year. This is the highest growth rate in non-interest earnings the bank has achieved in three years.
The bank’s main challenge in the year was the inability to grow interest earnings – which dropped by 11 per cent year to N267 billion at the end of the year. There was however improved performance in the second half, which accounted for a greater part of the interest income for the year.
The margin of drop in interest income narrowed down significantly from 22 per cent at half-year to 11 per cent at full year. The gains in non-interest income helped to reduce the margin of decline in gross earnings in the year.
GTHC closed the 2021 operations with gross earnings of N448 billion, which is a moderate decline of 2.3 per cent from the closing figure of over N458 billion in 2020. Improved performance in the final quarter lowered the margin of decline from 4.5 per cent at the end of the third quarter.
A better than expected final quarter enabled the bank to make up for the decline in interest earnings through strong growth in non-interest income and strong cost control effort. The bank’s management was able to convert 39 per cent of gross income into after-tax profit, one of the highest profit margins in the Nigerian banking space.
Earnings per share went down from N7.11 at the end of the preceding financial year to N6.14 per share at the end of 2021. The bank has announced a final cash dividend of N2.70 per share, upon an interim cash dividend of 30 kobo per share.
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