The H1 2020 result of GTBank Plc shows that operating expenses expanded by 19.2% y/y to NGN83.31 billion, with the most pressure exerted by regulatory charges – AMCON levy (+11.1% y/y to NGN17.20 billion) and NDIC premium (+105.0% y/y to NGN8.26 billion).
A relative decline in earnings as a deterioration of its still industry-best efficiency led to a moderate decline in profitability.
Consequent on the OPEX growth relative to operating income growth, cost-to-income ratio (ex-LLE) settled higher at 43.2% relative to 40.6% and 37.6% in the prior quarter and the corresponding period of the prior year respectively.
According to Cordros Research, profitability was weaker, with profit-before-tax settling 5.2% lower year-on-year, while profit-after-tax settled 4.9% lower, given the decline in income tax expense (-7.3% y/y to NGN15.44 billion).
Also, the bank proposed an interim dividend of NGN0.30/s, which translates to a dividend yield of 1.2%, based on a market price of NGN25.66/s (2nd September 2020).
Interest income grew by 3.2% y/y to NGN153.71 billion, supported by growth in income from loans and advances to customers (+6.2% y/y), and investment securities (+6.9% y/y), both of which masked declines across interest income from cash (-57.4% y/y), loans to financial institutions (-45.3% y/y) and assets pledged as collateral (-14.7% y/y). We note that the strong growth recorded in risk assets (8.2% YTD to NGN1.62 trillion) was likely responsible for the acceleration in interest income from loans to customers.
On the other hand, interest expense pared by 20.0% y/y to NGN26.09 billion, despite an increase in deposits by 18.5% YTD to NGN3.00 trillion, as the bank has seemingly continued to improve its CASA (low-cost deposits: current and savings accounts) mix during the year.
Consequent on the strong balance sheet management, net interest income growth was strong, expanding by 9.7% y/y to NGN127.62 billion.
Non-interest income grew moderately during in the period, settling 1.0% higher y/y at NGN72.18 billion, with major lines recording declines save for, gains from FX trading (+43.6% y/y to NGN7.65 billion) and FX revaluation (+723.1% y/y to NGN21.90 billion).
While NII grew at a slower pace than might otherwise been expected, given revised charges and weaker transactions flows occasioned by the global pandemic, the positive impact of revaluation gains should lead to a positive year-on-year performance in non-core income.
Given the growth in income, and despite the exponentially larger loan loss expenses (+209.7% y/y to NGN6.77 billion), the bank recorded an expansion in operating income of 4.0% y/y.