 impairment charges jumped 4,568% to N164.2 billion in the first half of 2023){kind=link}
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Guaranty Trust Holding Company Plc (GTCO) impairment charges which jumped 4,568% to N164.2 billion in the first half of 2023, were driven by exposures to two major obligors, WEMPCO and Aiteo, as well as Ghana Eurobonds.
“We have taken the two major loans of WEMPCO and Aiteo and we have run our expected credit loss (ECL) model against them, and decided that irrespective of what happens, we do not believe it can deteriorate further than N82 billion. So we upped our loan impairment by N82 billion. We believe it’s a nice cushion against whatever deteriorating macros might happen,” the Group Chief Executive Officer of GTCO Plc, Segun Agbaje, said in a conference call.
“In the event that they do not happen, this is available for write-backs. Aiteo loan restructuring will be done by October, while WEMPCO is a little trickier.”
GTCO also booked net impairment charge on other financial assets of N81.3 billion largely on the back of the default by the Ghanaian government on its Eurobonds, part of which is contingent.
“We look at our Eurobond exposure in Ghana we have already taken 30% haircut. The Ghanaian government has not yet settled the Eurobonds. It has done local bonds and local USD, however,” Agbaje said.
On December 5, 2022, the Government of Ghana launched the first Ghana’s Domestic Debt Exchange programme (DDEP), in response to the Government defaulting in servicing its debts when it suspended payments on most of its external debts including Eurobonds, to ensure debt sustainability aimed at securing a $3 billion IMF economic support.
Agbaje said devaluation of the naira has made people more receptive to bringing money into the country.
“At N900 per dollar, our capital adequacy falls to 18% but it will get better with retained earnings by year end.”
On cash reserve ratio (CRR), Agbaje said there had been no major CRR refunds by the Central Bank of Nigeria (CBN) to GTCO. The CBN is also still debiting banks on loan to deposit ratio (LDR) shortfall which is equivalent to a tightening by CBN, according to Agbaje.
“We are still at about 37% total deposit CRR. We will push for net interest margins or NIMs of 9% between now and end of the year on rising yields.”