The management of Guaranty Trust Holding Company Plc, GTCO, in its six months’s audited financials released on Thursday through the floor of the Nigerian Exchange, showed the HoldCo recorded decline in its top and bottom-lines. Despite a moderation in funding cost, the significant decline in core income given a combination of weak asset creation and a lower yield environment drove the weak performance.
Nevertheless, non-funded income growth was positive but not strong enough to offset the decline in interest income. According to the report, the HoldCo recorded an EPS of N2.79 less than N3.31 in 2020 and declared interim dividends of N0.30 per share representing a dividend yield of 1.1% based on a trading price of N27.05 per share as at today, September 10, 2021,
The weak financial performance resumed with interest income declined by 18.0% year on year to N126.09 billion, as all major lines recorded lower gains – investment securities declined by 44.0% year on year to N32.06 billion, while loans and advances to customers follow declined pattern by 1.6% year on year to N91.37 billion and cash balances with banks closed on the declined note by 13.6% year on year to N2.32 billion.
Interest expense also declined by 27.0% year on year to N19.04billion, but deposits changed the narrative by grown by 3.3% Year To Date to N3.63 trillion. Also, the funding mix deteriorated (CASA stood at six months of 2021 on 86.7% from 2020 Full Year on 88.9% as the HoldCo took on some higher-cost (term) deposits, likely due to tight system liquidity that increased competition for deposits forcing elongation of the maturity schedule. Given the more significant funded income decline that outweighed the decline in expense, the HoldCo recorded a 16.1% year on year decline in net interest income. Also, despite moderations in provisions for credit impairment declined by 30.3% year on year, net Interest income settled 15.3% year on year lower at N102.34 billion.
On the other hand, non-interest income grew during the period, settling 11.4% year on year higher at N80.39 billion. This followed the growth in net fees and commission income by 65.3% year on year to N36.86 billion, gains from FX trading by 5.3% year on year to N8.05 billion and discounts on digital earnings. As with preceding periods, income from e-business was a strong contributor, supported by reduced expenses on loan recoveries and bank charges.
Further driving this weak performance were higher operating expenses which hits 7.2% year on year to closed on N89.34 billion recorded, with the most pressure exerted by AMCON levy which jumped up by 27.3% year on year to N21.89 billion. On the back of OPEX growth and operating income decline, the cost-to-income ratio settled at 49.0% to 43.2% with six months of 2020 representing a significant deterioration in the bank’s efficiency of 5-year average to 2020Full Year stood at 37.3%.
Consequently, the HoldCo’s profitability declined significantly relative to the prior year, settling 15.8% year on year lower at N79.41 billion showed that the management headed by Miriam Olusanya as the Managing Director of the banking subsidiary needed to work hard to returned the Group as the holding company to profitability at the end of the year 2021.
The analysts at Codros Research in tis comment said the HoldCo’s performance is reflective of the pressured macroeconomic and business environments. Nevertheless, the analysts are of the opinion 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.