Nigeria’s largest lender by market value Guarantee trust holding company (GTCO) posted a record semi-annual profit for the year through June on the back of a large expansion in FX revaluation gain.
Earnings contributed more than half of reported revenue for the period.
The financial institution, whose main commercial banking division has a portion of its loans denominated in US dollars, benefited greatly from the roughly 40 percent weakening of the naira in June. This allowed repayments of such credits to increase in local currency, thereby increasing revenues and profits.
Gross profit accelerated 181 percent to 672.6 billion naira, with the corporate banking unit accounting for 68.9 percent of revenue. Net interest income rose 46.8 percent to 177.5 billion naira.
Like other lenders, GTCO has been racking up gains from interest income after an unbroken string of interest rate hikes since last May. But the high interest rate environment also means that problem loans are rising sharply as borrowers struggle to meet their obligations.
Credit impairment during the period increased from 3.5 billion naira to 82.9 billion naira, which translates to an increase of 2,257.5 percent in one year.
“As of June 30, 2023, the group reported total gross loans and advances to customers of 2,493.92 billion naira, a provision for ECL (estimated credit loss) of 178.58 billion naira and ECL impairment charges of 82.96 billion naira”, independent auditors Ernst & Young noted in their report.
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Other income rose 2,482.5 percent to 372.2 billion naira, supported by an unusual gain from exchange rate appreciation, which contributed 96 percent of that amount.
Profit for the period rose to 280.5 billion naira from 77.6 billion naira a year earlier. The net profit margin, which measures how much revenue has been converted into profit, stood at 41.7 percent. A year earlier it was 31.7 percent.
The directors have proposed an interim dividend of 0.50 naira per share, which translates to a payout of 14.7 billion naira.
In addition to commercial banking, the group’s operations encompass asset management, pensions and payments.