By Samuel Adegoke
This is not the best of time for a leading Nigerian commercial bank, GTbank PLC as the financial powerhouse recorded a slump in profits for the first half of 2020.
GTbank’s woes may have been complicated by Central Bank (CBN)’s slashing of charges on e-banking transactions, bank charges and corporate finance charges.
In its published audited report for the first half of the year (H1), Its Profit Before Tax (PBT) and Profit After Tax (PAT) dipped by five percent (5%) to N109.7 billion and N94.3 billion respectively due to sharp increase in operating expenses and impairment charges. The development has left its shareholders in panic mood as trading continues, particularly on the Nigerian Stock Exchange (NSE).
The bank, however, reported a 1.5 percent y/y increase in Gross Earnings (GE) to N225.1 billion, despite pressure on interest and non-interest income amid extreme regulatory environment and global public health crisis.
Interest income also came in 3.2 percent stronger, settling at N153.7 billion. An evaluation of the driver of interest income revealed that this was driven by an increase in the volume of loans disbursed and a surge in financial investment securities, which counter-poised the impact of lower asset yields. However, Non-interest income fell 2.0 percent to 71.4 percent, as net fees and commission income tumbled 34.0 percent to N22.3bn despite a 43.5 percent surge in FX trading gains to N7.7bn.
The sharp drop in fee & commission income is largely traceable to regulatory changes following the apex bank’s decision to slash charges. Thus, E-banking income fell 32.2 percent to N4.8bn, bank charges slumped 28.9% to N3.1bn and corporate finance fees tumbled 76.5 percent to N1.2bn. Still, COVID-19 induced lockdown was culpable amid reduced transaction volumes. As observed across the sector, impairment charges jumped 210.0 percent to N6.8bn, certainly triggered by increased probability of default due to macroeconomic weaknesses.
Cost to Income Ratio (CIR) came in at 43.2 percent following a 19.2 percent jump in OPEX to N83.3bn. Management attributed this to VAT and Naira devaluation induced inflation, increased regulatory cost (AMCON & NDIC due to a surge in total assets & deposits), as well as COVID-19 donations.
Hence, PBT and PAT slumped 5.0% lower to N109.7bn and N94.3bn respectively. This weighed on net margins and profitability ratios as PAT margin, annualized ROA and ROE moderated to 41.9 percent, 4.6 percent and 26.8 percent respectively.