Guaranty Trust Bank Q3 Earnings Bolstered by Lower Operating Costs

Guaranty Trust Bank (GTB) Plc, Nigeria’s largest lender by market capitalization released its nine-months (9M) 2020 numbers, which revealed a 3.2 percent year-on-year (YoY) decline in earnings after taxes to N142.3 billion.

The weakness in 9M’20 earnings mostly reflected a nearly four-fold jump in impairment charges to N10.1 billion.

However, in Q3’20, Guaranty Trust Bank earnings rose 8.6 percent quarter-on-quarter QoQ, bolstered by much lower operating expenses.

Q3’20 Highlights:

• Net interest income moderated by 1.9 percent QoQ on weaker asset yields.
• Non-interest income plunged by 24.9 percent QoQ largely due to a foreign exchange (FX) revaluation loss of N281 million (vs a gain of N13.5 billion in Q2’20). This offset the 52.5 percent QoQ and 19.4 percent QoQ increments in net trading gains and net fee income, respectively.
• Operating expenses reduced by 33.2 percent QoQ, principally due to non-recurring AMCON charges. This led to an 11.0 percentage points downward shift in cost to income ratio to 32.3 percent in the quarter.
• Impairment charges for Guaranty Trust Bank fell 39.1 percent QoQ likely due to improvement in economic environment post COVID-19 lockdown. This implies a moderation in cost of risk to 0.6 percent from 1.3 percent in Q2’20 (FY’19: 0.3%). NPL ratio also moderated to 6.5 percent from 6.8 percent in the prior quarter.
• Total assets are 22 percent higher from FY’19 level, supported by 25 percent growth in deposit.
• Annualised return on equity ROE and return on assets (ROA) were 26.3 percent (FY’19: 31.2%) and 4.6 percent (FY’19: 5.6%) respectively. Capital adequacy Ratio (CAR) remains relatively flat at 26 percent, above the 15 percent regulatory limit.