September 4, 2023/InvestmentOne Report

• Gross earnings of N672.60billion, up 225.83%q/q, 181.09%y/y.         
• Net interest income of N177.46billion, up 16.02%q/q, 46.84%y/y.
• Profit before tax of N327.40billion, up 242.62%q/q, 217.10%y/y..
• Profit after tax of N280.48billion, up 283.21%q/q, 261.66%y/y.

The eagerly anticipated half year financial report by Guaranty Trust Holding Company (GTCO) was released at the tail end of last week as the top financial institution posted stellar topline and bottom-line performance. Accordingly, gross earnings saw a significant increase of 181.09% y/y to N672.60 billion in the first half of 2023. This was majorly driven by the rise in total interest income from N147.20 billion in H1 2022 to N225.95 billion in H1 2023, an impressive 53.50% y/y increase. Meanwhile, despite the 84.00% y/y jump in interest expense, net interest income grew by 46.84% y/y to N177.46 billion. We highlight that the increase in interest income can be attributed to the high interest rate environment stemming from the doggedness of the Central Bank of Nigeria (CBN) to rein in elevated inflation in the Nigerian economy. In context, the report further showed that loans and advances to banks and customers increased from N832 million and N103.30 billion to N5.35 billion and N129.84 billion, respectively. This obviously translated to higher interest income for the company. 

Moving down the line, we observed a significant upward movement in loan impairment charges from N3.52 billion to N82.96 billion due to rise in impairment charges on loan to banks from N998,000 in H1 2022 to N13.78 million in H1 2023, while impairment charges on loans to customers also expanded from N3.52 billion to N82.95 billion in the same period. Furthermore, net impairment charge on other financial assets surged from N543,000 H1 2022 to N81.31 billion in H1 2023 majorly on the back of the N22.19 billion and N56.12 billion on both impairment charges on investment securities and contingents, respectively. Additionally, personnel expenses, depreciation, and amortization as well as other operating expenses recorded noticeable increases by 12.14% y/y, 11.59% y/y and 34.37% y/y to N20.79 billion, N19.36 billion and N85.42 billion, respectively.

Nevertheless, the remarkable growth in other income was substantial enough to offset the impact of the rise in impairment charges and expenses on bottom-line. In detail, other income rose sharply from N14.41 billion in H1 2022 to N372.22 billion in the period under review. In line with expectation, this was mostly spurred by the gain in foreign exchange revaluation which jumped to N357.47 billion in H1 2023 from N1.87 billion in the previous year as the Naira has seen significant depreciation after the CBN decided to harmonize the multiple exchange rate system adopted by the previous administration. Recall that the US Dollar was previously trading at around N460 levels at the official window prior to the end of May 2023; however, the greenback now trades above N700 levels after the decision was announced by the apex bank. Consequently, profit before tax (PBT) rose by 217.10% y/y to N327.40 billion, while profit after tax soared by 261.66% y/y to N280.48 billion despite the 82.61% y/y increase in income tax expenses to N46.92 billion. More so, an interim dividend of 50 kobo (+66.67% y/y) was declared by the financial institution, reflecting the commendable performance in the period. 

On a sequential basis, gross earnings grew by 225.83% q/q largely driven by increase in interest income (+17.09% q/q) and non-interest income (+616.35% q/q). However, despite the growth in loan impairment charges (+2224.23% q/q) and operating expenses (+168.53% q/q), PBT and PAT rose by 242.62% q/q and 283.21% q/q. 

Summarily, the result showed the resilience of the Group as its financial position remained intact in the first half of the year as seen from the growth in total assets and shareholders’ equity by 32.02% y/y and 29.00% y/y to N8.51 billion and N1.20 billion, respectively. Also, the Group’s cash balance expanded from N1.62 billion in H1 2022 to N2.30 billion in H1 2023. Overall, the financial performance exhibited by the Group in the period under review was impressive, driven by the relatively high interest rate amid tight financial conditions and FX revaluation gains. Going forward, we anticipate a similar performance in the remaining parts of the year due to the Group’s strong brand and huge presence in the financial services sector, especially in Nigeria.