Guaranty Trust Holding Company (GTCO) netted N367.4 billion for the first nine months of the year, its biggest after-tax profit on record, according to its earnings report published Tuesday.
The group outperformed the figure for the same period of 2022 by 181.9 per cent.
The strong result already puts in the shade the entire net profit of Nigeria’s biggest bank by market value for last year, when just N169.2 billion was recorded, and sets it on track for a more vibrant earnings performance when 2023 winds down.
An overhaul of Nigeria’s foreign exchange system, weakening the naira by 40 per cent few weeks after President Bola Tinubu’s ascension to power and subsequent plunges in the value of the naira, is opening the floodgates of exceptional foreign exchange gains for lenders with financial assets in foreign currencies.
GTCO and 4 other Tier 1 peers earned N2.3 trillion as foreign exchange gains in the year to June, according to PREMIUM TIMES’ calculations.
The financial services group earned N334.4 billion in foreign exchange revaluation gain in the period under review in a clear departure from a year earlier when a N7.4 billion loss was recorded.
The bonanza will not translate to higher dividends for shareholders this year as banks have been directed by the Central Bank of Nigeria (CBN) to reserve their FX gains as buffers against currency volatility and loan quality risks.
More importantly, it means the government is missing a big chance to cash in on the juicy gains from both the high-interest rate environment and the foreign exchange revaluation by imposing windfall taxes on lenders to bolster its critically low revenue levels, a moment markets like South Africa and some European countries have recently seized.
Like others, it continues to profit from the CBN’s contractionary approach to monetary policy since last July, which has allowed banks to charge more for loans availed to borrowers.
GTCO, which has Guaranty Trust Bank as its flagship subsidiary, earned 73.4 per cent more in interest income calculated using the effective interest method at N353.7 billion.
Net interest income, a key profitability metric accounting for the difference between interest earned by lenders and what they paid to savers for keeping their deposits, grew 56.9 per cent
Hiking rates are taking their toll though. As borrowers buckle under the strain of steep interest rates, default levels are rising sharply, with the lender having to provision N89.5 billion of its revenue against potential losses from problematic loans.
Net impairment charge on other financial assets came in at N59.1 billion compared to a year ago. when no such expense was recorded.
GTCO turned in a pre-tax profit advanced to N433.2 billion from N169.7 billion.