GTCO: Thriving Amid Expansion

Kayode Tokede

The audited result and accounts of Guaranty Trust Holding Company Plc (GTCO) for full year ended December 31, 2021 showed balance sheet improvement and sustained dividend payout to shareholders amid expansion into other businesses frontline.  

The group balance sheet remained well structured and diversified with total assets closing at N5.44 trillion in 2021, an increase of about 10 per cent from N4.94trillion reported in full year (FY) ended December 31, 2020.

A well-diversified funding base supported total assets growth in 2021 as customer deposits, equity and loans & advances to customers recorded 8.4 per cent, 14.33 per cent and 8.5 per cent growth respectively. 

However, the group’s loan and advances rose by 8.4 per cent to N1.8trillion from N1.66 trillion in 2020, due to decrease in foreign currency (FCY) loan portfolio as a result of scheduled repayments from obligors in the Oil & gas and manufacturing sectors. 

Customer deposit liabilities grew by 14.3 per cent to N4.01trillion from N3.51trillion in 2020 FY as the restricted deposits and other assets declined by 7.3 per cent to N1.14trillion in 2021 from N1.23trillion in 2020 as CBN released portion of sterilized Cash Reserve Requirement (CRR) by way of issuance of Special Bills.

The group’s deposit from customers rose by 14.33 per cent to N4.01 trillion in 2021 from N3.51trillion reported in 2020. The deposit growth is reflective of the group’s retail strategy, the key enabler in the face of the challenging operating environment, increased competition from Fintech’s and customers’ preference for Treasury Bills, which offered a higher interest rate.

The group’s total equity rose by 8.5 per cent to N883.23billion as at December 31, 2021 from N814.4billion in 2020 FY.

Maintaining stronger performance

The group’s Gross earnings declined by 1.6 per cent from N455.23billion in 2020 to N447.8billion in 2021, primarily from 8.8 per cent reduction in interest income from N292.74billion in 2020 to N266.9billion recorded in 2021.  

Interest expenses also dropped by 1.7 per cent to N46.28billion in 2021 from N47.07billion in 2020 to position net interest income to N220.6billion in 2021 from N2563.67billion recorded in 2020.

GTCO’s loan impairment charge decreased by 56 per cent from N19.57billion in 2020 to N8.5billion in 2021, following an improved outlook for the macro-economic variables used in the ECL model in 2021 compared with the gloomy outlook fuelled by the pandemic in 2020.

GTCO, however, grew its income from commission and fees rising 40per cent to N65.65 billion in 2021 from N46.94billion in 2020. It also raked in N22.39 billion in net trading income representing a 8.56 per cent  decrease in 2021.

The group’s e-business income alone raked in N21.08 billion, representing a 79per cent spike from N11.77 billion in 2020, suggesting an improvement in the utilization of the group’s e-banking channels in delivering services to its customers.

The group’s total operating expense grew by 10.06 per cent to N162.3billion in 2021 from N147.44billion in 2020 due to the impact of rising heading inflation and marginal Naira/Dollar rate movement in the official market which resulted in the increase in general prices of goods and services. 

Increase in OPEX

The recorded increase in OPEX by 10.06 per cent was below headline inflation, which closed the year at 15.63 per cent in 2021.

The growth in total operating expenses was driven by depreciation and amoritization that grew by 22 per cent to N35.3billion from N21.53billion in 2020 as a result of incremental charge on capital spend on expanding IT infrastructure as well as capitalisation of amount spent on furniture & equipment, computer hardware and software procured for branches in prior year. 

Also N93.53billion in 2021 regulatory charge- AMCON levy and deposit and other insurance premium contributed to growth in OPEX

In all, the group declared N271.5billion profit before tax in 2021, a decline of seven per cent from N238.1billion reported in 2020. Tax expenses rose by 25 per cent to N45.7billion in 2021 from N36.6billion to slowdown profit for the year to N174.84billion in 2021 from N201.44billion in 2020. 

The group’s Capital Adequacy Ratio (CAR) remained very strong closing at 23.8per cent while asset quality was sustained with Non-Performing Loan (NPL) ratio of 6.0per cent based on IFRS (6.92per cent based on CBN Prudential Guidelines) representing a marginal improvement over IFRS 6.4per cent impaired ratio and a slight increase over FY 2020 6.86per cent CBN Prudential Guideline NPL ratio.

 Also, Cost of Risk improved to 0.5per cent from 1.2per cent during the same period.

In terms of significant performance metrics, the Group maintained a decent showing with post-tax Return on Equity (ROAE) of 20.6per cent, post-tax Return on Assets (ROAA) of 3.4per cent, Full Impact Capital Adequacy Ratio (CAR) of 23.8per cent, and Cost to Income Ratio (CIR) of 42.3per cent.

The Board of directors proposed a final dividend of N2.80, coupled with the interim dividend to bring total dividend payout to shareholders at N3.00 per share on the issued ordinary shares of 29,431,179,224 of 50k each.

Performance Reflects strength

Speaking on the results, the Group Chief Executive Officer of GTCO, Mr. Segun Agbaje, said: “Our performance reflects the strength of our franchise and underscores our ability to deliver long-term value for our Stakeholders in spite of the challenges in the business environment and shifting economic conditions. As a Group, we have continued to explore newer ways to connect with our customers and better our communities by offering greater and more rewarding experiences.” 

He further added, “2021 presented a crucial opportunity as we took strategic steps to reorganise our business and advance our position as a leading financial services company. 

“With the recent addition of Pension Fund and Wealth Management businesses to the Group, we are well on our way to rapidly scale our operations and strengthen our foothold in these key industry segments. Our goal is to consolidate our place at the top of Africa’s financial services value chain by leveraging technology to provide end-to-end financial solutions to more people and businesses across Africa.”

The Holdings had announced the 100per cent acquisition of two subsidiaries of Investment One Financial Services Limited, thereby becoming wholly owned subsidiaries of GTCO.

The two subsidiaries are Investment One Pensions Managers Limited, and Investment One Funds Management Limited, which specialize in Pension Fund Administration and Investment One Financial Services Limited.

GTCO is undoubtedly one of the Tier-1 banks that delivers relentless service to its customers and shareholders alike and has performed quite exceptionally to emerge as one of the best banks in Africa.

The financial institution plans to diversify into payment service banking (PSB), asset management business and pension fund administration (PFA) without any distractions to its core banking business is expected to boost earnings and further enhance investors confidence in the market the bank is listed. 

Agbaje  had said:“We are very excited to get started on the next phase of our incredible journey to driving Africa’s growth by making end-to-end financial services easily accessible to every African and African Businesses by leveraging Technology and Strategic Partnerships. As a bank, we were always looking to meet every customer need; with our corporate reorganization, we will be able to do more to help our customers thrive in this new world of digital technologies and unprecedented possibilities.

“Whilst we are evolving as an organization, we remain committed to our founding values which have endeared our brand to millions of people across Africa and beyond, and which continue to drive our financial success. As a Proudly African and Truly International brand, we will continue to live by these values — of excellence, hard work and integrity, even as we create faster, cheaper, safer and products for people and businesses through every stage of life”, he added.

Analysts View

Analysts at Cordros Securities, the HoldCo’s performance is reflective of the pressured macroeconomic and business environments.

The company in its report stated that : “For the rest of the year, we expect improvements in funded income performance as maturing funds are reinvested at higher yields and risk asset creation is accelerated. These should supplement the consistent growth recorded in non-funded income.”

The bank is well known for its achievements of being the first Nigerian and African bank to be listed on the London Stock Exchange as well as pioneering the Internet Banking e-product.

With different branches spread across Africa and the United Kingdom, GTB has really done well for itself as is also confirmed in its annual financial reports. The sustained and impressive growth recorded year in and out has strengthened investors’ confidence in the bank, both in what it presently offers and in the promising future ahead.

GTCO  is a fully-fledged financial services group with banking operations across West and East Africa and the United Kingdom as well as non-banking businesses in several key industry segments including Payment, Funds Management and Pension Fund Management. 

With over 25 million customers and more than 10,000 employees, the Group remains one of the most profitable and best managed financial services companies out of Nigeria. Its leadership in the banking industry and efforts at empowering people and communities has earned it many prestigious awards over the years including Africa’s Best Bank and the Best Bank in Nigeria at the 2021 Euromoney Awards for Excellence. It also retained its position as Africa’s Most Admired Financial Services Brand in the 2021 ranking of The Brand Africa 100: Africa’s Best Brands.

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