Guaranty Trust Holding Company Plc (GTCO) piled up credit and financial asset losses of N198 billion in 2023. Still, an equally massive inflow of foreign exchange revaluation gains of N442 billion provided sufficient cover to throw off the losses without hurting the bottom line.
The bank’s audited financial report for the full year ended December 2023 shows that the foreign exchange gains spurred an unprecedented rise of 120 per cent in group gross earnings to roughly N1.2 trillion, also accounting for over 37 per cent of the earnings figure for the year.
The much-enlarged earnings basket for the year provided a golden chance for the bank’s management to jettison the huge impairment losses on financial assets and yet multiply profit for the year more than three times to close to N540 billion.
Net credit losses from core lending operations jumped by almost 759 per cent from less than N12 billion to N103 billion in the year and net impairment charges on other financial assets rose by over 164 per cent over the same period from below N36 billion to almost N95 billion.
In six years to 2022, the bank’s total net loan loss charges and net impairments on other financial assets stand well under N100 billion.
It was a big year for GTCO in terms of revenue inflow that provided a large room for the massive charge-offs. It yet permitted an exceptional growth of 219 per cent in after-tax profit from N169 billion in 2022 to N539.6 billion at the end of the 2023 operations.
Apart from the foreign exchange gains that propelled an outstanding growth of almost 557 per cent in other income to over N449 billion, other income lines recorded big improvements in the year.
Interest income came alive in 2023 after recording declines or slight improvements for most of the preceding five years. At N550.7 billion, interest earnings grew by over 69 per cent in the year – the strongest growth in many years and attaining a new peak for the first time since 2018.
Net gains on traded assets also grew by 54.4 per cent to close at over N62 billion while net fee and commission income improved by 19 per cent to over N109 billion at full year.
Apart from credit and financial impairment losses, the bank also came under pressure of rising cost of funds, which encroached on interest earnings.
Interest expenses grew by 72.6 per cent to N114 billion at the end of the year, beating the increase of 69 per cent in interest income.
Nevertheless, the increase in interest earnings was good enough to permit a much-accelerated growth of 68.4 per cent in net interest income to N436.7 billion at the end of the year.
However, the massive increase in financial asset losses claimed much of the gains in net interest earnings so that net interest income after the financial asset losses increased by 13 per cent from over N211 billion in the preceding financial year to N238.8 billion at the end of 2023.
The slow growth in earnings from the lending and investing business of the bank was more than compensated by a non-interest income-led revenue boost that saw gross income jump from N539 billion in 2022 to N1,186.5 billion at the end of 2023.
Significant cost savings from operating expenses support the outstanding growth in the bank’s earnings. The operating cost margin went down from 43.4 per cent in 2022 to a record low of 29.1 per cent in the full year – the lowest cost margin since 2017.
Conversely, the bank gained a net profit margin, which improved from 30.9 per cent to 45 per cent over the review period – the highest net profit margin in more than a decade.
The big increase in revenue and the strong gain in profit margin were the propelling forces for GTCO’s elevated group after-tax profit at the end of 2023.
The bank ended the 2023 full-year operations with earnings per share of N18.16, a strong elevation from N5.67 per share in the preceding financial year.
The directors have recommended a final cash dividend of N2.70 per share in addition to an interim of 50 kobo per share paid in the financial year.
