GTCO Sees Prospects In H1 Despite Profit Slip


Guaranty Trust Holding Company Plc (GTCO) lost profit at the end of half-year operations in June, as swollen tax expenses claimed more than all the N10 billion increase in pre-tax profit. The bank’s after-tax profit closed 2.3 per cent down year-on-year to N77.6 billion at the half year, narrowing down however from a decline of 5.1 per cent in the first quarter.

The company’s profit is bending downward for the second year after a drop of 13.2 per cent to N174.8 billion in 2021. Gladdening however is that the bank’s management has overcome the challenge of revenue decline that caused the profit drop last year according to the audited report for the half year ended June 2022

Against a decline of 1.6 per cent in gross earnings to N447.8 billion in 2021, GTHC achieved an increase of 15 per cent in gross income year-on-year to over N239 billion at the end of half-year operations. The bank is seeing the first double-digit growth in gross earnings since 2016.

A major turn of events for the bank is that interest income has reversed from leading revenue drop last year to leading its growth this year. Against a drop of 11 per cent to less than N267 billion in interest earnings in 2021, there is an upturn at 16.7 per cent growth in interest income at half-year to N147 billion.

Except for a slight improvement in 2020, interest income has declined every year for the bank since 2017.  There is hope therefore for the first strong growth in interest income in five years this year.

Non-interest income is tagging along at an increase of 12.5 per cent to N92 billion at the half year, which is led by strong growth of 33.5 per cent in net trading gains on financial instruments. A drawback on non-interest earnings is a drop of 15 per cent in other income to N22 billion over the review period.

Apart from tax expenses that directly caused the dip in profit, interest expenses have snapped back after three years of sustained decline. At over N26 billion in the half year, interest expenses grew by 38.4 per cent, more than twice the increase of 16.7 per cent in interest income. 

The stronger growth in interest expenses than income means the bank devoted an increased proportion of the earnings to meet the increased cost of funds at about 18 per cent compared to 15 per cent in the same period last year. 

Net interest income, therefore, grew at a slower pace than interest income at less than 13 per cent to N120.8 billion at the end of June 2022.
There is good news for the bank on loan loss expenses, which are dropping for the second year and generating much-needed cost savings. Loan impairment expenses dropped by over 25 per cent year-on-year at the end of half-year operations to N3.5 billion.

The cost saving from net loan impairment charges prompted an increase of 14.6 per cent in net interest income after the charges to over N117 billion.

The bank’s management extracted additional cost savings from operating expenses, which moderated at an increase of 10.9 per cent to N99.5 billion at the half year. The operating cost margin went down from 43.1 per cent to 41.6 per cent over the review period.
The cost savings from loan impairment and operating expenses were totally consumed by tax expenses that rose by more than 88 per cent to N25.7 billion for the half-year period.

Net profit margin declined from 38.2 per cent in the same period last year to 32.4 per cent in June 2022. This is the lowest profit margin for the bank in six years and a sustaining decline for the third year running.

The bank earned N2.70 per share at the end of June 2022, down from N2.79 per share in the same period last year. An interim cash dividend of 30 kobo per share has been proposed for payment