The first-quarter profit of Guaranty Trust Holding Company (GTCO) declined by 43.5 per cent relative to the same period of last year, taking a hit from a sharp slide in the unrealised gain on financial assets such as bonds and treasury bills.
The unrealised fair value gain on the financial instruments of the banking corporation, whose assets are more concentrated in securities than in loans to customers, slumped to N1.5 billion from N331.6 billion.
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That prompted other income, the lifeblood of its revenue a year ago, to diminish by as much as 91.8 per cent, according to its latest financial statements.
Revenue for GTCO, Nigeria’s largest financial services group by market value, fell to N523.2 billion from N680.5 billion during the period.
The report, nevertheless, showed some bright spots, especially fairly strong results from its core lending business, where efficient cost management boosted net interest income after accounting for loan impairment charges.
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Net interest income, a profitability metric indicating how much banks earn in interest after deducting what they pay savers, jumped 40.1 per cent to N318.4 billion.
Loan impairment charges dropped by 0.5 per cent in a mark of the group’s ability to reduce the cash statutorily reserved to cover borrowers’ defaults even when its credit exposure grew by 15.6 per cent.
Compared to the same quarter of last year, loans and advances climbed to N3.2 trillion from N2.8 trillion.
In January, GTCO raised N209.4 billion from the first strand of its equity capital raise programme after the central bank ordered banks to boost core capital (excluding shareholders’ fund) to new levels by April next year. The capital buffers that the regulator is asking lenders to create are to ease the path to the attainment of a N1 trillion economy by 2030.
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The policy shift expects GTCO, which operates in ten other countries, to ramp up the core capital of its commercial banking subsidiary GTB to at least N500 billion, a condition for lenders holding international banking licences.
Profit before tax for the review period fell to N300.4 billion from N509.3 billion, while post-tax profit shrank to N258 billion from N457 billion.
The drop left the net profit margin weaker at 49.3 per cent, compared to 67.2 per cent a year back.
Last month, credit ratings agency Fitch scaled up the issuer default ratings (IDR) of both GTCO and GTB to ‘B’ from ‘B-’, citing progress in Nigeria’s push towards orthodox economic policies.
IDR measures an entity’s creditworthiness by assessing its relative vulnerability to default on its financial obligations.
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