GTCO Sustains Dividend Payout Amid Expansion

Kayode Tokede

Guaranty Trust Holding Company Plc (GTCO) in its audited result and accounts for full year ended December 31, 2022 announced a significant improvement in balance sheet and sustained dividend payout to shareholders amid expansion into other business subsidiaries. 

The group balance sheet remained well-structured and diversified with total assets closing at N6.45 trillion in 2022, an increase of about 19 per cent from N5.44 trillion reported in full year (FY) ended December 31, 2021.

Total assets growth in 2021 was supported by a well-structured and diversified Balance sheet across all its Banking and Non-Banking Entities (Nigeria, Other West Africa, East Africa, United Kingdom, Payments, Pension and Asset Management).

It grew across all asset lines, benefiting from increased inflows from Deposit Liabilities on the back of an improved funding base driven by the synergy created through the Holding Company structure and a 6.1per cent y-o-y exchange rate movement in Nigeria (from 2021 closing of N435/$1 to FY-2022 closing of N461.5/$1).

The 12per cent increase in Deposit Liabilities was deployed to fund increase in Earning Assets which comprise Money Market Placements, Investment Securities and Loans and, to fund the increase in CRR debits. Earning Assets constitute 58per cent of Total Assets and grew by 9.6per cent to N3.77trillion in 2022 from N3.44trillion in 2021.

Net Loans grew by five per cent, closing at N1.86trillon in 2022 from N1.803trillion in 2021. This growth is essentially from Nigerian operations. The loan book remains well distributed with LCY:FCY mix improving to 53per cent :47per cent from 51per cent: 49per cent, positioning the Group against further depreciation.

Customer Deposit Liabilities grew by 11.8per cent (N472.8billion) from N4.012trillion in 2021 to N4.49trillion in 2022 as low-cost funds grew by 14.5per cent (N503billion) from N3.438trillion in 2021 to N3.941trillion in F2022, resulting in low-cost deposit mix of 87.9per cent from 85.7per cent in 2021.

In spite of the challenges in the operating environment and its attendant negative implication on the activities of individuals, households and businesses, the Group posted a Pre-tax Return on Average Assets of 3.6per cent and a Pre-tax Return on Average Equity of 23.6per cent.

Profit maintaining stronger performance

The Group’s gross earnings increased by 20.4per cent to N539.2billion in 2022 from N447.8billion in 2021 driven by the growth recorded on the Funded and Non-Funded Income lines. Interest earnings grew by 21.9per cent from the twin impact of growth in Earnings Asset volume and yield (8.53per cent in FY-2022 from 8.05per cent in FY-2021). Growth in volumes by N444.0billion (N2.879trillion vs N2.435trillion) underpinned by improved funding.

The 21.9% growth in Interest Income to N325.4billion in 2022 from  N266.9billion in 2021 was further complemented by the 18.2per cent growth posted on Non-Funded Income that hits N213.8billion in 2022 from N180.9billion reported in 2021.

 Non-Funded Income (NFI) comprising Fees and Commission Income (42.4per cent growth), Other Income (38.8per cent growth), and Trading Income (18.8per cent growth).

GTCO’s net Interest Income is up by 17.5per cent  to N259.3billion in 2022 from N220.6billion in 2021  as the 21.9per cent  increase recorded on the interest income line easily offset the 42.8per cent increase in Interest Expense that reached N66.1billion in 2022 from  N46.3billion in 2021.

The growth in Interest Expense was driven by the 71per cent increase in interest paid on time deposits  N27.6bn in 2022 from N16.1billion in 2021, as customers demanded more interest on their deposits.

The growth in interest Expense also led to an increase in the cost of funds from 0.88per cent in 2021 to 1.24per cent in 2022. Rising Inflation and an increase in MPR by the Central Bank contributed significantly to the pick-up in the cost profile.

Loan Impairment charge increased by 41per cent to N11.985billion in 2022 from N8.531bn in 2021 due to an increase in the probability of default generated by the predictive ECL impairment model from the macroeconomic data inputs, necessitating a need for an increase in the allowance for impairment in spite of the level of risks reserves already in place and loan quality.

The growth in Opex by 21.6per cent outweighed the 16.5per cent increase in Operating Income leading to a pick up in Cost-to-Income ratio to 48per cent in 2022 from 42.3per centi n 2021.

Overall, the Group benefited from the effective utilisation of its strategic, core and foundational capabilities; changing and adapting quickly to make the best use of opportunities and deal with challenges.

However, its performance was significantly hindered by the N35.6billion Impairment on the Ghanaian Sovereign Securities leading to a three per cent drop in 2022 profit before tax to N214.2billion from N221.5billion in 2021.

The Board of directors proposed a final dividend of N2.80, coupled with the interim dividend to bring total dividend payout to shareholders at N3.10 per share on the issued ordinary shares of 29,431,179,224 of 50k each.

Stronger capital ratios

The Group maintained strong capital positions with a Full IFRS 9 impact Capital Adequacy Ratio (CAR) of 24.1 per cent, a 910basis points above the regulatory minimum of 15per cent.

Tier 1 capital remained a significant component of the Group’s CAR at 23.8per cent representing 98.8per cent of the Group’s CAR of 24.1per cent.

The robust capital position provides the Group with the needed headroom for future expansion and risk-taking.

The Group’s Capital has been sensitized for Basel III compliance and three levels of devaluation of Naira to USD N550-N600-N650/$1 and found robust enough to meet the requirements of additional capital buffers – conservation and counter-cyclical under Basel III and expected growth in the Risk weighted value of the FCY component of the Group’s Balance sheet.

Conclusion

Speaking on the results, the Group Chief Executive Officer of GTCO, Mr. Segun Agbaje,  in a statement explained that “Our ability to successfully navigate the peculiar challenges in the different markets where we operate underscores our strong business fundamentals and unwavering commitment to sound business strategies. Despite the varying challenges and headwinds that weighed on growth in 2022, we were determined to deliver a decent performance and scale effectively to strengthen our competitive edge and drive long-term growth.” 

 He further stated; “As an organisation, 2022 was quite significant for us being the first year after our corporate restructuring into a financial holding company in August 2021.

“Today, across our Banking, Payment, Funds Management, and Pension businesses, we have successfully built a robust ecosystem with immense potential to deepen our addressable market and create more value for all our stakeholders. We will continue to prioritise innovation, service excellence, and execute seamlessly towards achieving our vision of leading financial services in Africa.”

The Holdings had announced the 100per cent acquisition of two subsidiaries of Investment One Financial Services Limited, thereby becoming wholly-owned subsidiaries of GTCO.

The two subsidiaries are Investment One Pensions Managers Limited, and Investment One Funds Management Limited which specialize in Pension Fund Administration and Investment One Financial Services Limited.