The most efficient lender in Africa largest economy, Nigeria, GTBank plc has once again overcome the economic headwinds bedevilling the sector by recording profit growth of 10 per cent to end 2014 financial year.
For the year ended December 31, 2014, the bank’s profit after tax increased by 10 per cent to N98.69 bn from N90.02 bn, the same period of the corresponding year (FY) 2013.
Earnings per share (EPS) also increased by 10 per cent to 347k in the review period from 317k the preceding year.
The impressive performance at the bottomline level, which is higher than the 8.2 per cent January inflation rate is coming amid regulatory induced costs that have been eating deep into the profits of lenders.
One of such regulatory induce costs is the Banking Sector Resolution Cost Fund, otherwise called sinking fund, which was created by the Asset Management Corporation (AMCON) and mandates banks to pay 0.5 per cent of their total assets to it on yearly basis.
Based on BusinessDay analysis, the Nigeria lender will be paying N10.50 bn AMCON charge in 2014.
In spite of the hike in interest by the Central Bank of Nigeria (CBN), GTBank was able to record a 15 per cent increase in gross earnings to N278.52 bn in FY 2014, compared with N242.66 bn the preceding year while interest expense grew by 8 per cent to N200.60 bn.
The CBN has increased benchmark interest rate to 13 per cent from 12 per cent, increasing it to 100 basis points, in order to stem losses to its foreign reserves and also defending the local currency that has been dropping as a result of fall in oil price.
GTBank was more aggressive about lending as loans to deposit ratio increased to 77.68 per cent in 2014 from 69 per cent as of December 2013.
Loans book also surged as loans and advances in the balance sheet jumped by 27 per cent to N1.28 trncompared with N1 trnthe preceding year, as the lender sought to replace profits lost to higher cash reserve requirements (CRR), tighter monetary policy and regulation aimed at lowering fees and increasing competition.
The growth in loan book was driven primarily by growth of the foreign currency loan book on the back of the 2013 $400 million Eurobond issue.
Deposit by customers were up by 14 per cent to N1.64 trnin FY 2014, as against N1.44 trnlast year on the back of the bank’s retail franchise.
The audited financial statement also showed the GTBank had strong asset base as total assets rose by 11.90 per cent to N2.35 trnin 2014 from in N2.10 trnin 2013.
Cost to income ratio jumped by 0.57 basis point to 43.40 per cent, which highlights the impact of the recent regulatory policies. Operating expenses were up by 15 per cent to N94.21 bn compared with N82.42 bn as of December 2013.
There were many write offs in its books as loan loss expenses surged by 146 per cent to N7.98 bn as against N2.88 bn the preceding year.
Cost-to-income remained low at 43 per cent (0.12% increase Y-o-Y), as the industry’s cost leader is likely to maintain its cost efficiency ranking.
Return on average equity (ROAE) in the review period was 27.93 per cent while the return on average asset (ROAA) was at 4.43 per cent, the highest in the entire banking industry.
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