GTBank 2017 Q3 graph courtesy TRW Stockbrokers Ltd.

Directors of Guaranty Trust Bank Plc, on Wednesday presented its un-audited financials for the nine-month ended September 30, 2017, which showed that the period was not as smooth sailing as before, especially with the drop, though marginal, in gross earnings, customer loans, as well as deposit base, the life-blood all commercial banks.
The result also showed that the bank’s saving grace was the huge decline in loan impairment charges, which fell to N8.356bn, from prior nine-month’s N57.083bn as restated as well as the non-provision for the toxic Etisalat loan, both of which ensured it did not suffer a sharp drop in profit before and after tax.
Gross earnings income fell from N329.283bn in the corresponding period of 2016, to N309.913bn, boosted by interest income of N248.27bn, which jumped from N181.909bn, helped by interest from customer loans and advances of N153.688bn, up from N140.779bn; as well as from investment securities available for sale, which grew from N27.457bn to N66.357bn. Interest expense climbed from N49.161bn to N58.703bn, the bulk of which was the N44.14bn interest paid on customer deposits, which rose from N36.892bn; following which net interest income climbed from N132.748bn to N189.566bn.
Net interest income after loan impairment charges was N181.209bn, up from N75.665bn.
Fee and commission income dropped to N39.676bn from N50.41bn, due to the significant decline in electronic business (e-business) income from N23.18bn to N9.138bn; just as credit related fees and commission dropped from N8.66bn to N7.03bn; as commission on foreign exchange deals rose to N4.821bn from N3.272bn. GTBank also earned N2.077bn from transfers related charges, down from N3.702bn; and account maintenance charges from N6.311bn to N7.542bn.
Fee and commission expense fell from N2.275bn to N1.699bn, resulting in net fee and commission income N37.977bn, as against preceding nine-month’s N48.134bn.
Net gains on financial instruments classified as held for trading jumped to N9.938bn from N3.013bn; other income suffered a slump also, falling from N93.95bn in the third quarter of 2016, to N12.027bn, as foreign exchange revaluation gain fell to just N11.669bn from N93.639bn.
In a review of the result, analysts at FBN Capital (FBNQuest) noted that “the year-on-year decline in earnings was driven by a 73% year-on-year reduction in non-interest income due to negative base effects in the prior year (GT Bank’s 9M 2016 earnings were boosted by foreign exchange revaluation gains of N93.6bn vs. N11.7bn 9M 2017).”
Personnel expenses rose to N24.629bn from N21.772bn; operating lease expenses increased N1.45bn from N1.324bn; depreciation and amortization increased to N11.26bn from N10.961bn; just as other operating expenses rose from N48.713bn to N53.021bn, the bulk of which was the N13.066bn one-off Asset Management Corporation of Nigeria (AMCON) levy, which rose from N11.388bn; followed by outsourcing services of N6.323bn, up from N6.005bn; and the deposit insurance premium of N5.826bn from N4.582bn.
Profit before tax came to N150.032bn from N137.991bn; income tax expense increased to N20.909bn from N24.454bn; following which net profit stood at N125.577bn, up from N117.081bn, which translated to Earnings Per Share stood at N4.44, as against the previous N4.14.
Total assets rose to N3.212tr from N3.116tr, even as customer loans and advances dropped from N1.589tr from N1.428tr; derivative financial assets also dropped from N1.042tr to N696.129bn; while restricted deposits and other assets increased to N437.268bn as against N371.995bn in the prior nine months.
Total liabilities rose marginally to N2.631tr from N2.611tr, as customer deposits dropped to N1.891tr from N1.986tr, even as other liabilities climbed to N252.281bn from N115.682bn.
Shareholders’ fund for the period rose from N504.902bn to N581.908bn
While rating GTBank shares Neutral, FBN Quest noted that “despite the year-on-year decline in earnings, we expect the market to focus on the broad positives, particularly the year-on-year decreases in opex and loan loss provisions. Notwithstanding, the weakness in non-interest income and the q/q decline in funding income will concern investors.
“Although the bank’s shares have gained 65% ytd (vs. a 36% year-to-date return on the NSE ASI), we expect a slight positive reaction from the market,” the report added.