Tuesday, August 30, 2016 5:22 PM / Research
The microeconomic challenges that influenced business outlook in 2015 financial year are yet to abate in 2016- the banks have witnessed growing headwinds and tougher operating environment in the current year.
The slow economic activities, low global oil price, shortage of FX, technical devaluation of currency with attendant impacts on NPL, floating of Naira, increase in MPR by 200bpts to 14% in the face of growing inflation and negative GDP growth- this had impacted and still impacting both top-line and bottom-line of the banks.
As a result of these mounting challenges, Guaranty Trust Bank Plc sustained both top-line and bottom-line growth, posting 37.2% and 45.1% positive growth respectively, with corresponding 46% growth in EPS. The top-line closed at N209.87billion against N152.99billion-. The improved cost management as CIR moderated at 34.1% against 43.75 coupled with strong earnings growth had impacted the bottom-line considerably.
However the bank recorded significant surge of 530. 9% in impairment charges to close at N37.55billion against N5.95billion - mainly driven by provisions for assets that have suffered devaluation losses.
Also, the NPL ratio moved up to close at 4.39% against 3.21% posted 2015FY period- The bank’s NPL ratio reveals weakness in risk assets management when compared with previous posture- However, it closed below regulatory benchmark of 5% - this remains commendable.
Summarily, below are the key takeaways from the Half-year 2016 presentation as presented by the management of the bank;
• Decline in interest income largely caused by drop in fixed income yields from 13.7% to 8.7%
• Provisions for assets that have suffered devaluation losses adversely impacts the impairment charges
•Improved contribution from subsidiaries and sustained growth in operating efficiency impacted bottom-line
•Gains from disposal of long term investment and FX earnings impacted profitability
•Balance remains robust and well structured with 72% of liquidity assets
•The bank had one exposure to power sector and the exposure is performing impressively
•Exposure to Oil & Gas and SME sectors are under control while restructure loans are insignificant
•The bank is adequately capitalized, no need to increase Tier II capital
•NPLs are adequately provisioned
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