GTCO sees high N29.3bn OPEX dampen N119.6bn Q1’22 earnings

HIGH N29.3 BILLION OP ERATING EX PENSES (OPEX) Nigeria’s leading lender,

Guaranty Trust Holding Company saw high N29.3 billion operating expenses (OPEX) dampen what was a 12.6 percent year on year jump to N119.6 billion in gross earnings in the first quarter of 2022 from N106.2 billion in the same period last year as profit for the period nosedived 5.1 percent year on year to N43.2 billion.

This was primarily due to a massive 70.7 percent year on year jump in interest cost and a 33.2 percent year on year increase in other operating expenses during the period.

In its unaudited consolidated and separate financial statements for the period ended 31st March 2022 filed to the Nigerian Exchange, GTCO reported a 17.1 percent quarter on quarter increase in the interest income which was due to a 29.5 percent quarter on quarter jump in interest income on financial assets at fair value through profit or loss to N6.7 billion in the first three months of 2022, as well as a 16 percent quarter on quarter increase in interest income calculated using effective interest rate to N63.9 billion in Q1.

The interest income was boosted by a 73.3 percent quarter on quarter jump in investment securities at an amortised cost to N7.8 billion in the reported period of 2022 compared to N4.5 billion in the prior year.

However, the increase in the interest income was offset by a 70.7 percent quarter on quarter jump in interest expense to N13.4 billion, primarily due to a massive 84.5 percent quarter on quarter increase in deposits from customers.

Therefore, its net interest income rose 9.1 percent quarter on quarter to N57.2 billion in the first quarter while the loan impairment charges declined 35 percent quarter on quarter to N1.2 billion due to a substantial reversal in Expected Credit Loss (ECL) and a “Significant Increase in Credit Risk (SICR)” in 1Q22, resulting in net interest income after impairment charges at N56 billion, a 10.7 percent quarter on quarter increase.

Elsewhere, GTBank, as it is popularly called, recorded a 1.2 percent quarter on quarter increase in other income primarily due to mark-to-market gains on trading investments. Again, the bank’s other operating expenses spurted 33.2 percent quarter on quarter to N29.3 billion in the first three months of the 2022 operating year.

The significant jump in other operating expenses was fuelled by a 49.1 percent quarter on quarter increase in deposit insurance premium to N3.6 billion, coupled with a 23.3 percent quarter on quarter rise in AMCON expenses to N11.6 billion and a massive 137.6 percent increase to N3.8 billion in administrative, communications and sponsorship-related expense in Q1.

Also, while the effective tax rate shot up to 20.4 percent in Q1 of 2022 from 15.2 percent same quarter last year, further reducing the profit after tax to N43.2 billion, a 5.1 percent quarter on quarter drop compared to N45.5 billion in Q1 of 2021, the profit before tax stood at N54.3 billion in Q1 of 2022 compared to N53.7 billion in the same period last year while the bank’s earnings per share came in at N1.51/share this quarter versus N1.60/share last year.

According to the holding financial company, its fee and commission income continues to be robust, with a 21.4 percent quarter on quarter spurt to N21.3 billion. Its e-banking income raked in N4.05 billion, representing a five percent increase from N3.86 billion in the same quarter of 2021, while the commission on foreign exchange deals stood at N2.1 billion compared to N1.5 billion in the first quarter