GTBank’s Reduction of NPL Ratio to 7.3% Excites Shareholders

By Dipo Olowookere

One of the issues that give serious concerns to stakeholders in the banking sector in Nigeria is the rising rate of non-performing loans (NPLs).

This is because it reduces cash flow, ties up capital, and reduces profitability, making shareholders get less or no dividend at the end of a financial year.

But one financial institution that has been working hard to reduce its bad debts is Guaranty Trust Bank (GTBank) Plc.

Few days ago, the pan-African bank released its numbers for the year ended December 31, 2018 and going by reviews, the company put up a good performance in the period under review.

GTBank is a financial institution listed on both the Nigerian Stock Exchange (NSE) and the London Stock Exchange (LSE).

An analysis of the financial statements showed that gross earnings improved by 3.7 percent to N434.7 billion from N419.2 billion reported in December 2017, while the profit before tax stood at N215.6 billion, representing a growth of 9.1 percent over N197.7 billion recorded in the corresponding year ended December 2017, with the bank’s customer deposits increasing by 10.3 percent to N2.274 trillion from N2.062 trillion in December 2017.

While the NPL ratio dropped to 7.3 percent from 7.7 percent, the loan book dipped by 12.9 percent from N1.449 trillion recorded as at December 2017 to N1.262 trillion in December 2018, with the Cost of Risk closing at 0.3 percent in December 2018 versus 0.8 percent in December 2017.

Business Post reports that though the Capital Adequacy Ratio (CAR) dropped to 23.4 percent from 25.7 percent a year earlier, loans to deposits ended at 53.5 percent against 67.5 percent in FY 2017.

In addition, the coverage ratio for NPL stood at 105.1 percent while the Post Tax Return on Equity (ROAE) and Return on Assets (ROAA) closed at 30.9 percent and 5.6 percent respectively.

Impressed by the performance of the firm in the reviewed year, Managing Director/CEO of GTBank, Mr Segun Agbaje, said; “In 2018, our focus on staying nimble, strengthening customer relationships and driving our digital-first strategy paid off.

“We successfully navigated the pressures of our challenging and radically changing business environment, recorded growth across key financial indices and reaffirmed our position as one of the best performing and well managed financial institutions in Africa.”

He said further that, “This result reflects, not just the fundamental strength of our brand, but also our commitment to our values of excellence, creating value for all stakeholders and putting our customers first in everything that we do.

“Driven by these values, we are building the bank of the future by pairing the best of our business with the massive potential of digital technologies to create Africa’s first integrated and trusted platform; Habari.”

Some holders of the bank’s shares, who spokes with Business Post after the release of the results expressed their excitement at the gradual reduction of the company’s bad loans.

“It is a good development and I am happy that this will bring more value to my investment in the bank,” Blessing Omorodion, a shareholder with GTBank said.

At its January 2019 meeting, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) expressed its satisfaction with the gradual reduction in NPL of deposit money banks (DMBs) in the country, which it said has further strengthened their balance sheets.

The committee had expressed believe that as government pays off contractor debt and other obligations, there will be a sizable reduction in the NPLs of the banking system.

Recently, GTBank and other banks exposed to the $1.2 billion 9mobile (formerly Etisalat Nigeria) debt were given a part of the syndicated loan by the new owners, Teleology Holdings.

GTBank has continued to report the best financial ratios in terms of profitability, efficiency and capital for a financial institution in Nigeria as revealed by its return on equity (ROAE) of 30.9 percent, a cost to income ratio of 37.1 percent and capital adequacy of 23.4 percent, reflecting the efficiency of the bank’s management.

In recognition of the bank’s bias for world-class corporate governance standards, excellent service delivery, and innovation, GTBank has been a recipient of numerous awards over the years.

Some of the Bank’s awards in 2018 include Bank of the Year – Nigeria from the Banker Magazine, Best Banking Group and Best Retail Bank Nigeria from World Finance Magazine, Most Innovative Bank from the African Investor, and Best Digital Banking Brand in Nigeria from the Global Brands Magazine.