GTBank Displays Strength against Regulatory Headwinds

Guaranty Trust Bank plc like any other bank was not insulated to the challenges regulatory headwinds brought to the banking industry in 2014 but however, GTBank weathered the storm.

The regulatory environment governing the Nigerian banking industry has been characterised by policy changes aimed at supporting the fiscal tightening stance adopted by the Central Bank of Nigeria (CBN).

Regulatory Headwinds

Some of the key changes, which were made by CBN in 2014 include:

  • Increase in Cash Reserve Ratio (CRR) for banks on public sector deposits from 50 per cent to 75 per cent and from 12 per cent to 15 per cent on private sector deposits.
  • Reduction in commission on turnover on current account from N2 in 2014 to N1 per mille presently, among others.
  • Reduction and removal  Automated Teller Machine (ATM) and COT charges
  • Increase in the Asset Management Corporation of Nigeria’s (AMCON’s) levy from 0.3 per cent to 0.5 per cent amongst others.

Guaranty Trust Bank plc like any other bank was not insulated to the challenges regulatory headwinds brought to the banking industry. However, GTBank weathered the storm going by the Bank’s 2014 full year results, which showed a strong and positive performance across all financial indices. It also affirms the duo’s position as the most profitable financial services providers in Nigeria. GTBank maintains number one in the banking sub sector and fourth most capitalised stocks.

Market watchers believe that in spite of decline in overall market indices, market sentiment for the shares of banks will be gingered and remain upbeat as bargain hunters will take position on the back of positive results and proposed dividend payments.

Share prices
While GTBank’s share price, which closed at N26.23 per share in April 30, 2014, dropped by N1.95 or 8.03 per cent to close at N24.28 as at last Friday, Zenith Bank equally declined from N22.70 to N20.94 during the period under review, representing a dip of N1.76 or 8.40 per cent. Just as other quoted firms in the local bourse are facing depression in share prices, market sentiments for the shares of the banks have dwindled relatively due to challenging operating environment.

GTBank’s financials
The Group delivered an impressive profit before tax of N116.39billion, an increase of 9.30billion or 8.7 per cent over the N107.09billion reported in December 2013, and gross earnings of N278.52billion, representing a surge of 14.8 per cent from the N242.67billion recorded in the same period of 2013.

In terms of value creation for its shareholders, the lender recorded pre-tax ROAE of 32.94 per cent and ROAA of 5.22 per cent respectively. GTBank’s balance sheet remained strong with 12.4 per cent growth in total assets, from N2.10trillion in 2013 to N2.36trillion in the year under review.

The loan book growth increased by 27.12 per cent to close at N1.28trillion from N1.01trillion in 2013 driven primarily by growth of the foreign currency loan book on the back of the 2013 $400million Eurobond issue. On the back of continued growth of the bank’s retail franchise, customer deposits grew by 13.3 per cent from N1.43 trillion in 2013 to N1.62 trillion in 2014.

The bank continued to maintain a disciplined and prudent approach to loan growth in line with its risk management framework. The bank’s non-performing loans (NPL) ratio remained low at 3.15 per cent, down from 3.58 per cent in the comparative period of 2013. On the backdrop of this result, the lender is proposing total-year dividend of N1.75k per share (inclusive of the 25 kobo interim dividend paid at half year 2014).