GTCO still depositors preferred bank

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By Chinwendu Obienyi

Follwing Nigeria’s recovery from recession and COVID-19 pandemic which had sent shock waves to the global economy in 2020, experts had predicted there would be new streams competitive sentiments were bound  to happen in virtually all  sector of the economy especially the banking industry in 2021.

As it is in other industries, competition in the banking system is desirable for efficiency and optimisation of social welfare. However, in banking sector, due to its roles and functions, there are some properties that distinguish it from other industries.

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These properties include; regulatory compliance, new business models on a day-to-day basis, customer retention, outdated mobile experiences, digital adoption, security breaches, costly maintenance of Automated Teller Machines (ATMs) among others.

For instance, if banks compete against each other, they have to provide quality services to their customers – otherwise people will switch allegiance  to better, banks. This makes banks to strive toward becoming more efficient and productive, which  are some of the qualities often considered good for the economy.

Hence, it is very true that competition in the banking sector is very fierce as the Central Bank of Nigeria (CBN) tightens its regulation in a bid to manage the economy amidst another recession.

It should also be pointed out that with the difficult economic situation and increasing inflation, consumers’ purchasing power has continue to weaken. Hence, the major concern of most people is to have enough money to take care of basic needs and survive and those who manage to save part of their meagre income want to ensure that the savings are well secured in a bank.

Also, there has to be some form of high level of confidence in such a bank and today, Guaranty Trust Holding Company (GTCO) Plc has become one of the preferred institutions by depositors.

Since transitioning into a Holding Company Structure, the group has been on its destination to create more value for Nigerians, deliver better results for all its stakeholders and further enrich lives in the communities wherein it operates.

Also, the group has set its sight on making financial services to go beyond banking. The group had in a statement noted that “As part of our long-term strategy, we are entering the next phase of our growth wherein we want to create and drive innovative financial solutions that go beyond banking. In order to do so, we were legally required to adopt a holding company structure, which we have now completed. This means we are able, ready, and well-positioned to help you achieve the full breadth of your financial goals, in ways we were limited, as a bank”.

Hence, when the group filed its Audited Consolidated and Separate Financial Statements for the full year of 2021, there was cause for optimism on its long-term outlook, as the performance reflected the challenging operating environment.

Firstly, the group’s e-business income alone raked in N21.08 billion, representing a 79 per cent spike from N11.77 billion in 2020, suggesting an improvement in the utilization of the group’s e-banking channels in delivering services to its customers.

Its gross earnings declined by 1.6 per cent from N455.23 billion in 2020 to N447.8 billion in 2021, primarily from 8.8 per cent reduction in interest income from N292.74 billion in 2020 to N266.9 billion recorded in 2021.  

had Also, the bank’s loan impairment charge decreased by 56 per cent from N19.57 billion in 2020 to N8.5 billion in 2021, following an improved outlook for the macro-economic variables used in the ECL model in 2021 compared with the gloomy outlook fuelled by the pandemic in 2020.

However, the group’s balance sheet remained well structured and resilient with total assets rising by 9.9 per cent to N5.44 trillion from N4.94 trillion recorded in the same period of 2020. Also, the bank was able to attract high deposits by customers as deposits grew to N4.01 trillion from N3.51 trillion in 2020, representing a 14.3 per cent increase.

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The group’s Non-Interest Income (which is the bank and creditor income derived primarily from fees including deposit and transaction fees, insufficient funds (NSF) fees, annual fees, monthly account service charges, inactivity fees, check and deposit slip fees), rose by 13.4 per cent from N151.44 billion in 2020 to N171.68 billion in 2021.

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GTCO’s loan book grew to N1.80 trillion in 2021 as against N1.66 trillion in 2020, representing a 8.4 per cent increase while shareholders’ funds or total equity grew by 8.5 per cent to N888.23 billion from N814.40 billion, thus reflecting a strong capacity for internal capital generation and growth.

In terms of significant performance metrics, the Group maintained a decent showing with post-tax Return on Equity (ROAE) of 20.6 per cent, post-tax Return on Assets (ROAA) of 3.4 per cent, Full Impact Capital Adequacy Ratio (CAR) of 23.8 per cent, and Cost to Income Ratio (CIR) of 42.3 per cent.

These impressive indices led to the Board recommending of a final dividend per share of N2.70 per share, which would be subject to withholding tax. The company had earlier paid an interim dividend of 0.30 kobo in May 2021, hence bringing the total dividend for the financial year to N3, same as what was paid in 2020 but a 7 per cent increase from the total dividend paid in 2019.

According to the bank’s audited statement, it remains committed to the fight against all forms of financial crime, which includes, money laundering, terrorism financing, bribery and corruption. To show this commitment, the Group continually implemented a framework for Anti-Money Laundering (AML), Combating the Financing of Terrorism (CFT) and the prevention of the financing and proliferation of weapons of mass destruction.

Commenting on the results, the Group Chief Executive Officer, GTCO Plc, Segun Agbaje, said that the performance of the group reflects the strength of its franchise and underscores its ability to deliver long-term value for the bank’s stakeholders in spite of the challenges in the business environment and shifting economic conditions. 

“As a Group, we have continued to explore newer ways to connect with our customers and better our communities by offering greater and more rewarding experiences,” he said.

He further added, “2021 presented a crucial opportunity as we took strategic steps to re-organise our business and advance our position as a leading financial services company. With the recent addition of Pension Fund and Wealth Management businesses to the Group, we are well on our way to rapidly scale our operations and strengthen our foothold in these key industry segments.

Our goal is to consolidate our place at the top of Africa’s financial services value chain by leveraging technology to provide end-to-end financial solutions to more people and businesses across Africa.”

The holding company 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. This has undoubtedly turned GTCO into a bank that delivers relentless service to its customers and shareholders alike and has performed quite exceptionally to emerge as one of the best banks in Africa.

The financial institution said it plans to diversify into payment service banking (PSB), asset management business and pension fund administration (PFA) without any distractions to its core banking business is expected to boost earnings and further enhance investors’ confidence in the market the bank is listed. 

Agbaje said, “We are very excited to get started on the next phase of our incredible journey to driving Africa’s growth by making end-to-end financial services easily accessible to every African and African Businesses by leveraging Technology and Strategic Partnerships. As a bank, we were always looking to meet every customer need; with our corporate reorganization, we will be able to do more to help our customers thrive in this new world of digital technologies and unprecedented possibilities.

Whilst we are evolving as an organization, we remain committed to our founding values which have endeared our brand to millions of people across Africa and beyond, and which continue to drive our financial success. As a Proudly African and Truly International brand, we will continue to live by these values — of excellence, hard work and integrity, even as we create faster, cheaper, safer and products for people and businesses through every stage of life” Assessing GTCO FY 2021 results, analysts at Cordros Research, said the group’s interest expense continued on a positive trajectory as it pared by 1.7 per cent year-on-year (y/y) to N46.28 billion, despite an increase in deposits by 14.3 per cent y/y to N4.01 trillion, as the bank’s CASA (low-cost deposits: current and savings accounts) mix improved to 90.9 per cent as against 88.9 per cent recorded in 2020.

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