2013 FY Analysis: GT Bank Delivered Despite All Odds

GTB released its 2013 FT results showing an 8.79% rise in Gross revenues to N242billion. Operating profit at the end of the period rose 4% to N107.9billion (2012 FY: N103billion). Profit after tax at the end of the year was N90billion compared to N87billion posted in 2012. Let’s look at the key highlights of this result.

Key Highlights

• Out of the Interest income of N185billion interest from loans and advances to customers made up N117billion (2012: N113.9billon).
• GTB grew its loan book by 18% YoY for 2013. This is an improvement over the 11% growth recorded in 2012
• It is interesting to note that out of the N1trillion recorded as loans and advances to customers, N397.8billion are denominated in US dollars (N550billion is denominated in Naira)
• Interest income also includes about N40.6billion in income from available for sale securities compared to N731million a year earlier. This was a major contributory factor to the 8% rise in interest income this year. A closer look reveals the obvious reason.
• Treasury bills this year accounted for N374billion in available for sale investments compared to N15.7billion posted in 2012.
• Interest expense did increase by 22% in the year under review as various regulatory pronouncements increased cost. For example, there was an increase in minimum savings deposit rates that affected banks during the year.
• Amcon also increased their sinking fund charge from 0.3% to o.5% during the year
• As expected fees from C.O.T dropped during the year by 13% to N13.7billion. This was a result of the slash in C.O.T cost incurred by bank customers. This income stream will probably be zero by 2015 provided the new CBN Governor doesn’t change it.
• GTB is well known for operating a very efficient cost structure. In fact they have posted the lowest cost to income ratios across Nigerian banks for years now. This year they claim cost to income ratio  was 43% basically unchanged from last year.
• Personal and admin expenses remained basically flat year on year
• GT Bank deposits also rose 24% YoY in 2013…this is quite aggressive considering the bank is not well know for intense marketing. A lot of this growth has to do with their growing presence in the retail space as they rely on social media to drive deposits. Increased deposits have basically helped spur lending
• Despite all the good stuff, GT Bank did see all their margins down in 2013. Operating profit margin was down 4.5%  and profit margin down 5.2%. However, the drop in margins was quite understandable considering the regulatory headwinds that affected results. In fact, the drop in margins can be traced to one source…Interest margin. Interest margin dropped 3.7% YoY compared to a 1.4% drop in 2012.
• GT Bank still posted Returns on Equity of 29%, the highest in the banking industry and even in Africa. However, this was lower than the 34% posted a year earlier

Finally

• Nigerian Banks did face a lot of regulatory pressured in 2013 as the CBN exerted its full might on their operations.
• Apart from the gradual elimination of C.O.T, this is unlikely to occur again as the banks would have fully adjusted
• GTB also has a low NPL of 3.58% which provides comfort for investors. Their ability to control non-performing loans is well known and I would expect they continue to keep quality loan books.
• GTB in 2014 plans to continue to rely on retail to grow deposits which is very much welcomed. They are waxing strong in the retail space and I am happy they will continue to push for cheap deposits.
• They also plan to remain cost efficient driven and plan to keep cost to income ratios below 45%.
• They also plan to keep lending and in fact target a (strangely wide) 15% to 20% growth in lending this year.
• GTB remains a bank we very much like and have a very reputable management. It might not be the great working environment it used to be before, but Segun Agbaje has a very risk averse mindset and is an ardent believer in quality lending.