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GT BANK :RESILIENT IN A ROUGH ECONOMIC SPACE

For the captains of industries the ongoing financial year is a baptism of fire . The operating environment for many economic agents including banks in Nigeria was quite inclement in the first half of 2020; deleterious economic and social environments were compounded by Covid 19 pandemic. Expectedly , these  had unsavoury effects on banks’ ability to sustain respectable bottom lines as stagnant  growth, declining margins and falling  market shares littered the corporate landscape.

.However ,some banks with   iron teeth appeared  to be proving resilient and minimizing  the damage in face  of a metaphorical hard nut depicted by the operating clime.


GT Bank Plc ,no doubt, was one of them .The management put up a good fight to    weather the storms . Under this stifling environment, the bank still maintained a positive position at the top line albeit marginally. It grew its Gross revenue by 1.5 percent fromN225.14 billion as against 221.87 billion recorded in the corresponding period of 2019.The lethargic pace could be attributed to the challenges of a harsh economic environment, a systematic or economic wide phenomenon resulting from the general lull in country and across the world.

In spite of the fact that  the bottom line witnessed a slight  decline by 4.9 percent to N94..271bn in the first half of 2020 from N99.333bn in the corresponding period of 2019,underlying performance metrics remained positive. Based on the above ,some  analysts noted there is no cause for alarm .
 To them  since  the decline was not seismic to raise any eyebrow ,informed  investors and other  stakeholders are less  bothered by a storm in a tea cup  .This may not be farfetched. The bank’s track records in value delivery and skills at work that give the stakeholders a brilliant hope and confidence about  the brand remain unquestionable and reassuring. The above  facts were confirmed by  the Chief Executive Officer of Guaranty Trust Bank plc, SegunAgbaje,. While commenting on the just released financial results  , the CEO noted :“ these are undoubtedly tough and trying times for people, businesses and economies the world over. Our financial performance in the first half of the year reflects the quality of our past decisions which have broadened our earnings and strategically positioned us to thrive, thus far, through the current global health and economic crises. Underpinning this financial performance is our commitment to being there for our customers and the communities we serve, and over the past six months we have lent the full weight of our franchise to safeguarding lives and livelihoods of our staff and customers by leading from the front in the fight to curtail the Covid-19 outbreak and offering grace periods on loans to our small business customers.”
He further stated that “Going forward, our focus is not just to survive this pandemic, but to thrive beyond it. That is why we are going ahead with our plans to reimagine how we create value for all our stakeholders. We know that making financial services work for customers goes beyond banking, and in line with our long-term strategy, we will seek to create and drive innovative financial solutions that go beyond banking”

.GT Bank  has distinguished itself where it matters most .The bank has continued  satisfied its  five major constituencies including the surplus units from which it borrows, the deficit units which borrow from it , the shareholders, the regulatory authorities and the communities in which it operates as a corporate citizen .

To the shareholders , the bank has a tradition of providing adequate returns .Either by way of capital appreciation or dividend. Sequel this and despite the decline in the net profit , the bank directors still proposed an interim dividend of 30 kobo per share for the half-year period. The dividend is payable electronically on September 21, 2020 to shareholders whose names appear on the register of members when it closes on September 15 and September 3, 2020 for holders of the bank’s Global Depository Receipts (GDR).

. Moreover, GTBank has continued to report the best financial ratios  in the industry .In the period under  review its Return on Equity (ROE) was  26.8% and cost to income ratio was 43.2%.The above ratios demonstrated and confirmed GT Bank as a brand that sets pace as a mirror of efficiency. From the above it could be deduced that the bank expended N43 for N100 made as revenue. This feat confirms the bank as consistent industry leader in terms of efficiency. The feat could be traced the capability to cut costs when low cost deposits increase ,cost  of risk  and loan loss expenses are coming down

Besides the above the bank has never reneged its responsibilities as a corporate citizen .Recently, the Bank was also awarded the Best Bank in Nigeria by Euromoney Magazine for a record-extending tenth time and the Euromoney Excellence in Leadership Africa Award for its swift reaction in responding to the Covid-19 crisis and for addressing the impact of the pandemic on its customers and communities.

Moreover , the brand’s forte  in risk management is another highlight  of its leadership.  Banking is coterminous  with risk management. The bank’s rare feat managing the traditional risks of mismatches between assets and liabilities and between borrowing and lending rates has become one of its core competencies.This skill is core to its exploits in the business of maturity transformation. A critical analysis of the of the bank’s book in the first half of 2020 revealed a daft application of the management experience beginning with leveraging net interest income by suppressing interest expenses while at the same time guiding the growth of interest income . Interest income for the period stood at N150.486bn, a 2.7 percent up from N146.448bn in June 2019 .The ability of the management to suppress its interest expense exponentially by 20 percent led to a drop to N26.093bn last June from N32.627bn in the corresponding half-year of 2019 .This resulted in net interest income of N127.615bn,a 9
7 percent jump from N116.364bn compared to its 2019 figure . .Net interest income is a guide to how a bank manages the interest it pays on borrowing and lending ,proved the worth and skill of the bank in the core banking business of maturity transformation. This is the live wire of a deposit money bank .This was evidently demonstrated in its asset quality,NPL ratio and Cost of Risk.NPL and Cost to income  closed at 6.8% and 0.4% in June 2020 from 6.5% and 0.3% in December 2019 respectively.Though a little bit above the regulatory  requirement of 5percent the enough coverage was provided to the tune 118.1 percent. Thisan indication of prudent disposition consistent with the bank’s known records of excellent credit risk management. Overall, its asset quality remains stable .

The bank’s balance sheet was robust as its loan to deposit, liquidity and capital adequacy ratios were well above the regulatory threshold.  For instance its capital remains strong with CAR of 22.9% as at the first half  this financial year.

On the backdrop of this result and to cement  its place as the most efficient bank its Return on Equity (ROAE) and Return on Assets (ROAA) stood at 26.8% and 4.6% respectively.

 Meanwhile the robust nature of the balance sheet is another high point driving its capabilities . The Bank closed the half year ended June 2020 with Total Assets of ₦4.511trillion and Shareholders’ Funds of ₦720.9Billion. For such weighty shareholders fund ,it is natural to pull in heft deposits as its total deposits grew by 18.5 percent from N2.532 trillion to N3.001 trillion between the period under review.


Expectedly , so many challenges bedeviled the terrain . With slowed down economic activities and macroeconomic indicators flashing red the risks facing the banking industry became worse .This led to a big jump of 209.6 percent in loan impairment charges within the period from N2.186bn in 2019 to N6.769bn .This suppressed further the net interest income by 5.8 percent after loan impairment charges to N120.846bn, as against the previous N114.178bn
That was not all .While the bank put up a good fight in the core banking area retaining a positive the outlook despite unimpressive earnings yields and heavy risks involved , the non interest income segment unleashed stricter challenges dictated by the regulatory policies that cut back income drivers and potentials. Naturally, a good manager of a bank or financial institution usually rev up non interest income items of its balance sheet because it holds the key to stabilizing earnings especially at the time of interest rate volatility or when unimpressive yields prevailed.
For GT Bank the first half of 2020 proved very tough in this segment as fee and commissions income was dealt a blow by the CBN policy. A look a its performance in this segment showed some mixed feelings . Fee and commission income fell by 30 percent from N35.348bn to N24.729bn, with credit related fees and commissions dropping from N6.564bn to N3.352bn; e-business income from N5.053n to N1.188bn .Commission on foreign exchange deals was marginal, from N3.389bn in the first half of 2019 to N3.042bn , account maintenance banks from N5.709bn to N5.54bn; and banking charges from N3.948bn to N3.063bn; among others.Fee and commission expense inched up by 62 percent from N1.505bn to N2.435bn, of which bank charges soared from N656.854m to N1.6bn.The net fee and commission income declined by 34 percent to N22.294bn from N33.843bn.This set a stage for less than inspiring movements in the bank’s bottom line as pre-tax and net profits slump albeit marginally.

Net gains on financial instruments held at fair value through profit or loss inched from N9.488bn to N10.791bn, lifted by foreign exchange trading gain of N7.65bn, up from N5.329bn.
Other income soared to N35.909bn from N28.039bn,mainly foreign exchange revaluation gain of N21.902bn, a giant leap from N2.66bn in 2019;while recoveries and others slowed down to N3.3bn from N10.44bn Net impairment reversal on other financial assets soared from N108.445bn to N3.18bn.
Personnel expenses was constrained at. N18.775bn from N18.578bn;depreciation and amortization climbed from N10.622bn to N14.024bn; and other operating expenses by 26 percent from N39.439bnhalf year 2019 to N49.548bn in June,2020.


After the interactions between the revenue and cost drivers the bank profit before tax stood at N109.713bn, a 5.2 percent jump as against N115.787bn while income tax expense fell marginally from N16.654bn to N15.442bn.
Net profit for the period translated to Earnings per share of N3.32, compared to the previous N3.50 each.The overall impacts of the above suppressed the bank pretax margin marginally from 52 percent last year June to 49 percent in the first half of this ongoing financial year. That means from every naira the bank earns from a combination of interest assets, fees and commissions before paying the tax man he makes 49k as against 52k in the corresponding period of 2019 .Pretax margins are indications pointing to how well a company manages its financial resources. This development had a contagious effect on the net interest margin which stayed flat at 44 percent probability helped by marginal drop in taxation in the first half of 2020.

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