GTB: Profit waned as provision for credit impairment rose significantly

GTB: Profit grew marginally on the back of increased impairment charges

GTB's profit before tax for financial year 2015 rose by 3.7%....Perhaps the lowest in the history of the bank that is recognised as the pride of Africa.

Banking sector's performance reflects to a greater extent the true economic performance of an economy per time. Especially, the performance of a good bank, say the kind of GTB.

What went wrong? The growth in pretax profit moved in the same direction as the growth recorded in the nation's gross domestic product (GDP).That means, there is no multiplier effect on productive resources for the period from this angle

At the top line, GTB recorded just 8.1% increase in gross earning.

Interest income grew by 14.3% but related interest expense moved up faster at 19% leaving the bank net intest income growth at 12.3%.

The bank felt the downturn in the economy more than usual as signifcant degree of total loans and other risk assets were impaired by as much as 74.8% leaving less to be desire in the bank's usual tighten credit management policy.

Provision for credit impairment charges grew to N12.4 billion from N7.1 billion indicating quite a red flag going forward as economic woes continue unabated into 2016.

Judging from the figures, it was observed that while interest expense use to directly generate income trend faster, the magnitude of their relation left GTB with a stronger position.

The bank's result shows that there was a negative impact from investment placement in the capital market or related platform.

In the financial performance scorecard, income from investment stake and other operating income sourced dropped by 8.1% from N75.8 billion to N69.5 billion.

This came when investment in financial securities/asset on the statement of financial position rose by as much as 14.3% to N490.2 billion from N429 billion in corresponding year.

As a cost leader in the industry, its operating expenses marginally soared 1.8% albeit below the average rate of inflation at 9%.

The bank earned N3.8 kobo on shareholders investment with the current share price at N16.25 kobo.

GTB's net margin dropped to 33.3% in 2015 compare to 34.2% in 2014 with cost of risk at 0.9% as against 0.6% in the correspondence year.

The bank portion of loan cover by customers deposit jerked up to 83.9% from 77.7% in 2014.

To finance its business in 2015, GTB increased its leverage level to about 34% to N345 billion from N259 billion as customers deposit declined by about 1%.

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