Guaranty Trust Bank Plc, Nigeria’s largest lender by market value, recorded profit growth to end 2015 financial year, thanks to contributions from interest income as the lender continues to thrive amid a plunge in oil price and foreign exchange restrictions.
For the year ended December 2015, the bank’s net income increased by 5.29 percent to N99.43 billion from N94.43 billion as at December 2014.
The Full year 2.15 financial statement of Guaranty Trust showed the growth in profit was due to a 14.26 percent rise in interest income to N147.5 billion.
This means interest income from loans and advances and rising non-interest income has trickled down to the bottom lines.
Analysts say the Nigerian lender has one again proven that its risk management strategy and innovative products have paid off despite the fret or shudder by some lenders that have issues profit warnings that Full year earnings will falter on the back of economic headwinds.
Africa’s largest economy is reeling from a significant drop in oil price by 60 percent to $40 a barrel, an uncertainty that forced the Central Bank to restrict foreign exchange trading to banks.
Banks are groaning that the shortage of dollar is hurting profit and squeezing liquidity in the system. Manufacturers are also hard hit by FX restrictions as they cannot access import.
Nigeria banks are also exposed to exposure to oil and gas risk, rising Non-Performing loans (NPLs) and huge bad debts as oil companies are not paying back loans as a result of the sudden fall in oil price.
Due to the high risk of defaults, Guaranty Trust’s loan impairment charges has risen by 74.89 percent to N12.40 billion as delinquent debtors spikes.
Guaranty Trust intends to consolidate on its diversified risk management strategy, reduce exposure to oil and gas and trim NPLs by eying investment in retail business.
Nigeria’s huge population of 170 million that crave for consumption means the lender has chosen the right investment path.
Guaranty Trust remains aggressive to lending amid liquidity squeeze as loans to deposits ratio moved to 85.09 percent in December 2015 as against 78.89 percent at December 2014.
Further, loans and advances to customers were up by 7.87 percent to N1.37 trillion in December 2015 from N1.27 trillion in December 2014. Deposits from customers remained flat at N1.61 trillion.
Further analysis Guaranty Trust financial statement showed total operating expenses moved by 1.57 percent to N82.65 billion in December 2015 from N81.37 billion in 2014. Total assets increased by 7.23 percent to N2.52 trillion as at December 2015.
The bank is currently operating in Kenya, Rwanda and Uganda as well as in six other countries outside of Nigeria.
The market reacted positively to Guaranty Trust earnings growth as share price increased by 4.55 percent to N17 1:48 pm, March 14, 2016, on the floor of the exchange while market capitalization was N478.25 billion.