GTCO’s FY’25 Stumbles: Profit Plumps Amidst FX Losses and Tax Hikes

GTCO’s FY’25 results reveal a sobering reality, with a 14.9% year-over-year decline in Profit After Tax to N865.7 billion, marking a significant setback for the bank. The dual pressures of unrealised fair value losses linked to Naira appreciation and a soaring Effective Tax Rate (ETR) of 29.7% have taken a toll on the bank’s bottom line, with Earnings Per Share (EPS) plummeting by 28.2% year-over-year, underscoring the challenges GTCO faces in navigating Nigeria’s complex fiscal landscape and maintaining shareholder value amidst a rising share base.

GTCO’s Q4’25 performance was a mixed bag, with its weakest quarterly core performance in FY’25 as interest expenses surged 35% year-over-year, outpacing interest income growth. This squeezed the bank’s margins, but a rebound in net fee and commission income, coupled with recoveries and impairment reversals, helped drive a 10.1% quarter-over-quarter increase in pre-tax profit to N330.3 billion, showcasing the impact of one-off gains on quarterly performance.

GTCO’s profitability metrics took a hit in FY’25, with Return on Average Assets (ROAA) and Return on Average Equity (ROAE) declining to 5.3% and 28.3%, respectively, reflecting the impact of rising costs and subdued earnings. Despite this, the bank’s board proposed a final dividend of N11.76 per share, bringing the total FY’25 dividend to N12.76, a testament to its commitment to shareholder returns, even as it navigates challenging operating conditions.

GTCO’s core performance in FY’25 tells a tale of mixed fortunes, with Net-Interest Income rising 19.1% year-over-year to N1.3 trillion, driven by strategic investments in treasury bills and money market placements. The bank’s Interest Earning Assets (IEA) expanded 28% year-over-year to N12.7 trillion, underpinning the growth in interest income. However, this growth was tempered by rising funding costs, which outpaced interest income growth, leading to a moderation in Net Interest Margin (NIM) by 1.8 percentage points to 11.1%. The shift towards term deposits, reflected in a moderation in CASA ratio to 82.6%, has contributed to the increased funding costs, highlighting the challenges GTCO faces in balancing growth and profitability.

GTCO’s Non-interest Revenue (NIR) faced a significant setback in FY’25, declining 40.2% year-over-year, largely due to unrealised fair value losses on financial instruments. This masked underlying growth in account services and credit-related fees, which rose 40.6% and 2x year-over-year, respectively, driven by increased lending activity. The decline in NIR, combined with rising operating expenses, pushed the Cost-to-Income Ratio (CIR) up 5.6 percentage points to 27.6%, highlighting the pressure on GTCO’s profitability from cost inflation and subdued non-interest income

GTCO’s asset quality showed signs of improvement in FY’25, with the NPL ratio moderating to 5.0% from 5.2% in FY’24, despite a 6.2% year-over-year increase in Non-Performing Loans (NPL) to N160.5 billion. The more robust 10.6% growth in gross loans supported this moderation. Additionally, Cost of Risk (CoR) declined 2.7 percentage points to 2.2%, driven by a 51.4% year-over-year fall in impairment charges on loans, reflecting the high base of FY’24 where legacy loans were written off, indicating improved credit risk management