Pushing back against a worsening economic recession, GT Bank Nigeria’s most highly capitalised financial institution has managed to sustain strong operating earnings. It’s Profit after tax (PAT) for the third quarter of 2016 rose by 59.6% rising from N75.2b in 2015 to N119.9b in 2016. The upward flip in earnings bucked a downward spiral in the nation’s gross domestic product (GDP). GDP slumped by -0.46% in the first quarter and dipped a further -2.1% at the end of the second quarter. Analysts are convinced that third quarter figure for GDP is likely to take a further knock as declining manufacturing output and foreign exchange scarcity result in lower domestic output. Managers of GT Bank remain unfazed, ‘we recognize the constraints posed to our earnings by a slowing economy, but we are equally optimistic that the economy would create opportunities that would enable us give financial value to various stakeholders’, said a manage who refused to be mentioned as he was not authorized to speak on behalf of the bank.
GT Bank’s chief operating drivers seem to include a hefty growth in the retail arm of its business as agitated customers move from banks that they suspect to be ‘weak’ to banks that they consider ‘strong’ or at least stronger. The march to stronger institutions or flight to safety has resulted in a surge in deposit liabilities of banks like GT and has resulted in such banks witnessing a one-off ballooning of their operational profit. But in the third quarter of the year in particular GT made most of its cash from foreign exchange translation gains, in other words the bank made a huge non-repeatable gain from its foreign exchange trades.
Nevertheless, the financial service sector generally has been under severe pressure in 2016 as public policies such as the Treasury Single Account (TSA) and the reduction in expenditure thresholds for Ministries, Departments and Agencies (MDA’s) has led to lower public sector deposits thereby stalling the ease with which deposit money banks (DMB’s) could hitherto create credit. ‘The outlook for most banks in an era after the implementation of TSA seemed rather dark, but GT has like a magician pulling a hare out of a hat, defied logic, at least on the face of it’, says Rotimi Ogunwale, Senior Vice President of Imperial Finance and Securities. Ogunwale notes that, ‘the banking sector is not likely to escape the consequences of broadly declining economic output, banks profit and loss accounts are going to get squashed in 2016, but as for GT the good news is that their earnings will stay strong, but how long the adrenaline will last is anybody’s guess’.
GT made a beefy N93.6 billion revenue from forex revaluation gain in Q3 2016, representing a 1,282.3 per cent increase from N6.8 billion it raked in over and above the figures for the same period in 2015, making its ‘other income’ top line grow by 1,259.3 per cent to N94 billion in Q3 2016 as against N7billion in 2015.
Analyst believed this was a one-off gain this may not repeat itself in the last quarter of the year.
The Central Bank of Nigeria after much pressure floated the naira in June this, which making it to crash from N197 it was pegged to N305 interbank market as at Friday, so, GT Bank which has huge forex reserves benefited immensely from this in Q3 2016.
GT Bank net income also went upped 10.5 per cent to N132.7 billion during this period instead of N120.1 billion it recorded in the same period last year.
At the same time, the lender’s net fee and commission income increased by 28.2 per cent to N48.1 billion in Q3 2016 against N37.5 billion in Q3 2015.
Meanwhile, the bank impairment charges on loss loans ballooned by 570.3 per cent to N57.1 billion during the period being reviewed (Q3 2015: N8.5 billion), when its loans and advances to customers improved by just 19.6 per cent to N1.6 trillion during this time (Q3 2015: N1.4 trillion).
This is no mean performance given the inclement operating environment.
“Despite the complexities of today’s financial landscape, we continue to remain true to our founding values: Service excellence, Professionalism, Integrity and Innovation, whilst ensuring we understand and meet the peculiar needs of our various stakeholders, every single time. Our employees imbibe this vision and that is why we are a successful financial institution today”, G T Bank GMD, Mr. Segun Agbaje said
G T Bank Plc has been consistent in demonstrating its superiority over its peers in the banking industry. The bank, in fact, has sustained its position as the highest valued banking stock. Even though, the bears have a stronghold on the market, G T bank stock is trading at 29.3% higher than the stock of Stanbic IBTC which the second highest priced. The bank’s stock closed at N21.50 per share last Thursday, 17 November 2016.
As a result of its successes, many organizations have tried to model their operations after G T Bank. Its compact disposition appears to have yielded fruit. Some believe that the bank’s management style has even generated envy among its peers. Any time there is comparison among the banks, the argument tends to favour G T Bank more. This has truly mystified its operations and brand name over the years. Curiously, the reputable Harvard Business School in United States of America(USA) and Crainfield Business School had as a result carried out a deep research on the effectiveness and uniqueness of the G T brand.
Its modest success has shown that quality actually pays in the long-run. This may be the reason why the bank has run a modest, focused, tight and qualitative organization. In fact, the bank believes in doing its own thing rather than join the fray of aggressive competition that pervades the Nigerian banking industry.
From the early 1990’s the bank has tirelessly set the pace for other Nigerian financial institutions in terms of service quality, product functionality and excellent customer service. However, that quality of service may be waning now given the increased number of customers prompted by those migrating from the rescued banks. This has put more pressure on its capacity to maintain its quality. After listing at the stock exchange in 1996, it was the first Nigerian financial institution to undertake US$350million S Eurobond issue and a US$750million Global Depository Receipts (GDR) offer. The listing of the GDRs on the London Stock Exchange in July 2007 made the bank the first Nigerian Company and African Bank to attain such a landmark achievement.
G T Bank is one of the blue-chip companies on the Nigerian Stock Exchange. Many have earned a living by investing in the bank’s shares. The bank has been generous to its loyal share with impressive dividends.
It paid 28kobo in 2001; 75kobo in 2002; 95kobo in 2003; 70kobo in 2004; 45kobo in 2005; 70kobo in 2006; 75kobo in 2007; 70kobo in 2008; 100kobo in 2009 and 75kobo in 2010 in addition to bonus of 1 for 4. The bank also paid 125 kobo in 2011, 155kobo in 2012, 170 kobo in 2013, 175 kobo in 2014 and 177 kobo in 2015.
But this is happening when majority of listed deposit money banks (DMBs) financial performance scorecard in the third quarter of the financial year 2016 reflects the sluggish economic disposition of the nation as average banks’ profits weakened as against the corresponding year’s numbers. The growth in the total assets of the systemically important banks in the period – of which loans and advances account for a significant chunk – did not however automatically translate to improved profitability.
Interestingly, a critical observation of the banking industry suggests that the macro-economic environment can hardly reflect a liquid balanced financial system and that the challenges in the economy cannot be divorced from the financial system. The countries revenue is shrinking emanating from the sharp drop in the price of crude, foreign reserves is low and the currency which has been adjusted from N197 per dollar to about N382 is weakening by the day. The financial institutions cannot thrive in isolation of these challenges. Recently, some of the banks have sacked a large number of their workforce in order to cut costs and remain afloat. Bloomberg an international new agency in its report titled last weak fingered some banks which should further scrutinised by the regulator to include Diamond Bank while other analysts believe that Wema Bank and Unity Bank should also be scrutinized.
The fact, market observers say is that some of the banks are still struggling to remedy their extreme exposure to the oil and Gas industry to the tune of 35 to 40 percent. Their difficulty in getting out of this hole is hinged on challenges being currently faced by the price of crude which fell from $114 per barrel in June 2014 to about $30 before stabilizing at $40 and above.
Recently, the non-performing loans in banks are posing fresh threat to the financial institutions, having far exceeded the regulatory and prudential benchmark of 5 per cent.
However, reports from the CBN on the highlights of banking industry performance released on June 13, 2016 revealed a mixed scorecard. According to the report which was presented by Dr. Sarah Alade, Deputy Governor (Economic Policy) of the Central Bank of Nigeria the total deposits in the Deposit Money Banks dropped by 5.6 per cent or N1.029 trillion from N18.54 trillion recorded in April 2015 to N17.51 trillion in April 2016.
The financial intermediation role of the banks, the report noted has also been impaired over the last one year as gross credit to the private and public sector declined by N41 billion or 0.3 per cent from N13.4 trillion in April last year to N13.36 trillion in April 2016.
Total assets of the banking sector also decreased by N154 billion from N27.58 trillion to N27.43 trillion in the one-year period under review. The report said that Non-Performing Loans (NPL) ratio for the banking sector has increased to 10.1 per cent, way above the prudential limit of 5 per cent.
“The NPLs ratio stood at 10.1 per cent as of April 2016, which was well above the prudential limit of five per cent. The sustained low price of crude oil, supply constraints at the forex market as well as other macroeconomic conditions impacted negatively on the quality of bank loans.” The implication of this is that NPL ratio grew by about 100 percent in the period of review.
Nevertheless, Dr Alade blamed most of these challenges including the decrease in bank deposits to the implementation of the Treasury Single Account (TSA) policy of the Federal Government which pools all government revenue in one single account for the effective and transparent management of public finance.
In the face of blistery economic headwinds expected in 2017, GDP will likely remain weak and wobbly, GT Bank may continue to be a pleasant oasis in a desert of financial penguins.