GTCO reports biggest-ever profit by a Nigerian-listed company in six months

Guaranty Trust Holding Company (GTCO) posted a net profit of N905.6 billion in the first half of the year, as a mixed bag of favourable factors helped propel its bottom line to the highest level ever reached by any Nigerian quoted company.

The figure is roughly double the after-tax profit of Dangote Cement, Nigeria’s biggest company by market value, for last year.

The pretty remarkable result reflects the sheer magnitude of the fortune that lenders in the country continue to derive from the harsh macroeconomic trends like inflation and currency devaluation besetting manufacturers and other businesses.

The perfect picture of how well the financial institution turned the tide to its advantage is perhaps most evident in net profit margin, which represents how much of revenue has been turned into profit, often calculated as profit after tax as a percentage of revenue.

Net profit margin for the period stood at 65 per cent, compared to 41.7 per cent in the same period of last year.

Gross earnings for GTCO, Nigeria’s biggest lender by market value, more than doubled to 1.4 trillion from a year ago, according to its audited earnings report issued Wednesday.

Other income, dominated by unrealised fair value gain on financial instruments and unrealised gain on forward transactions, at N630.3 billion accounted for the bulk of revenue.

That implies how much the income source of the top-tier lender has diversified in recent years as a devaluation of the naira early in the year created new major income streams for lenders like GTCO which have investments in foreign currency-denominated assets.

The Central Bank of Nigeria (CBN) weakened the naira 34.3 per cent against the dollar in January, causing the rate of exchanging the naira for a dollar to jump from 895.3 at the start of the year to 1,529.1. This in turn created a boon for such banks after converting their dollar assets into naira.

GTCO earned N153.9 billion in foreign currency translation gains during the period, up from N103.7 billion a year ago. This boosted its total comprehensive income by almost threefold to more than N1 trillion.

The unprecedented revaluation gains that lenders are reaping from the exchange rate volatility have prompted the Nigerian government to propose a one-off 50 per cent windfall tax to be levied on such income by banks.

A few months ago, the Senate raised the rate to 70 per cent before approving it, a move banks, rating agencies and consultancies view as too aggressive and capable of straining the finances of lenders.

Net interest income, a key profitability metric that measures the difference between how much lenders charge on loans or earn on financial assets and how much they pay for borrowings or for keeping depositors money, climbed 177 per cent to N491.5 billion.

GTCO achieved that on the back of an aggressively hawkish stance of monetary authorities in Nigeria this year, which has sharply raised lending costs.

The CBN has lifted rates by 1,525 basis points since May 2022 in one of its longest rounds of rate tightening on record in the hope of tempering the inflationary pressures that have fuelled a cost-of-living crisis in Africa’s most populous country.

GTCO’s profit before tax for the period jumped more than threefold to N1 trillion, while profit after tax advanced to N905.6 billion from N280.5 billion.

The financial services group completed a public offer of N400.5 billion earlier in the year, aimed at meeting a new minimum capital requirement by the central bank.