Focus for the week: GTCO FY’24 Earnings Release – Strong earnings growth amid resilient margins

GTCO Plc delivered an outstanding financial performance in FY’24, with profit after tax (PAT) surging by 89.0% y/y to N1.0 trillion (Vetiva estimate: N1.1 trillion) from N539.7 billion in FY’23, marking the first time the bank crossed the N1 trillion profitability threshold. This stellar result was driven by an 81.0% y/y increase in gross earnings to N2.1 trillion (Vetiva estimate: N1.9 trillion) from N1.2 trillion, underpinned by a robust 144.0% y/y growth in interest income to N1.3 trillion (FY’23: N550.7 billion). This was fueled by higher earnings from loans and advances (N515.7 billion), gains from investment securities (N562.6 billion), and cash and cash equivalents (N226.0 billion), driving asset yields up to 15.3% from 9.9% in FY’23.

Resilient NIM despite rising cost of funds
Interest expense surged by 148.3% y/y to N283.2 billion (Vetiva estimate: N266.4 billion), driven by a 121.9% y/y increase in interest paid on deposits to N234.5 billion and higher borrowings from other financial institutions of N47.3 billion. Consequently, the cost of funds (CoF) rose to 3.1% (FY’23: 1.8%). Despite this, GTCO maintained robust asset yield performance, with net interest margin (NIM) expanding to 12.1% from 7.8% in FY’23. This suggests that the GTCO effectively repriced its interest earning assets, offsetting the impact of rising funding cost.
Non-interest income and cost efficiency drive strong operating performance
Non-interest income grew by 25.0% y/y, supported by a 73.0% y/y increase in net fee and commission income, a 39.0% y/y rise in trading income, and an 11.0% y/y uptick in other income. This, in turn, drove total operating income up by 73.9% y/y. Meanwhile, operating expenses (OPEX) increased by 60.9% y/y to N403.0 billion (FY’23: N250.4 billion), driven by an 85.0% y/y rise in personnel expenses to N85.4 billion and a 56.2% y/y increase in other operating expenses to N259.6 billion. Despite these cost pressures, GTCO maintained cost discipline, with its cost-to-income ratio (CIR) improving significantly to 30.9% from 42.4% in FY’23.
Notably, impairment charges declined by 17.0% y/y to N164.3 billion (FY’23: N197.9 billion), bringing the cost of risk down to 5.9% from 7.9% in FY’23. While the bank’s loan-to-deposit ratio (LDR) declined to 28.0% (FY’23: 33.0%), suggesting that earnings growth was primarily driven by loan repricing amid the high-interest rate environment rather than portfolio expansion, total non-performing loans (NPLs) rose by 38.0% y/y to ₦150.98 billion (FY’23: +7.0% y/y). As a result, the NPL ratio increased to 5.2% from 4.2% in FY’23.

What shaped the past week?
Equities: The domestic bourse ended the week on a bearish note, posting a 0.90% w/w loss, closing at 104,563.34 points. All sectors closed the week in negative with the Insurance sector recording the highest decline, dipping by 4.57% w/w, as losses in CORNERST (-15.15% w/w), SOVRENINS (-15.00% w/w), and LASACO (-12.82% w/w) weighed heavily on the sector. The Banking sector also recorded a loss of 2.20% w/w, driven by a decline in ACCESSCORP (-9.71% w/w) and UBA (-4.21% w/w). The Oil and Gas sector fell by 0.50 % w/w, with selloffs in ETERNA (-9.90% w/w) and OANDO (-8.60% w/w). The Consumer goods and Industrial sector equally experienced losses, with both sectors closing in red, recording a w/w loss of -0.61% and -0.26%, respectively.

Fixed Income: A positive balance in system liquidity was maintained this week as it opened at N906.85 billion and ended at N303.04 billion positive. However, we saw interbank rates expand marginally, closing at 26.58%. In the secondary market, the NTBs and OMOs market witnessed bullish sentiments, as investors sought to fill unmet demand from the NTB primary auction held on Wednesday, following the release of Q2 NTBs calendar. The bond market saw limited activity as investors maintained a cautious approach. However, bullish sentiments were observed on the short end of the benchmark curve, with a rally seen in the 5-Year bond.
Currency: In the currency market this week, the naira depreciated marginally at the NAFEM window as the naira lost 2.35% against the dollar to close at ₦1,603.78/USD.

Domestic Economy:
Given the recent announcement of new import tariffs by Trump on several economies with Nigeria being imposed with a tariff of 14% imposed on non-oil exports alongside the universal baseline tariff of 10% on all imports. This global macroeconomic shift thus led to oil prices declining significantly, plummeting to as low as $60.22 this week before showing signs of recovery, closing the week at $63.78, following Trump’s announcement of a pause in the new import tariffs for 90 days. The impact of the trade war was also seen in the Nigerian Foreign Exchange Market despite the CBN facilitating market activity by making a provision of $197.71 million through sales to authorized dealers last week Friday. This week, the Naira depreciated significantly, surging to as high as N1,629.94/$ on Wednesday, and ending the week at N1,603.78. Despite the efforts of the CBN to stabilize the Naira, the currency remained under heightened pressure due to global macroeconomic risks.
Global: Wall Street posted solid gains on Friday as big banks kicked off first-quarter earnings season and investors closed the book on a turbulent week of wild swings driven by the chaos of U.S. President Donald Trump’s multi-front trade war. All three major U.S. indexes ended the session sharply higher after assurances from Boston Federal Reserve President Susan Collins that the Fed is prepared to keep financial markets functioning should the need arise.
The S&P 500 and the Dow recorded their largest weekly percentage gains since November 2023, while the Nasdaq registered its biggest weekly percentage advance since November 2022. All 11 major sectors in the S&P 500 were last in positive territory, with materials and technology, enjoying the largest percentage gains. The Dow Jones Industrial Average rose 619.05 points, or 1.56%, to 40,212.71, the S&P 500, gained 95.31 points, or 1.81%, to 5,363.36 and the Nasdaq Composite, gained 337.15 points, or 2.06%, to 16,724.46. In European markets, the Pan-European Stoxx 600 index closed 0.1% lower, following its best session since March 2022. The U.K.’s FTSE 100 closed 0.64% higher while the FTSE 250 was flat after data showed the British economy grew significantly more than expected in February. Germany’s Dax and France’s CAC 40 fell by 0.9% and 0.3%, respectively. Building on strong Thursday gains, the Euro added another 1.3% against the U.S. dollar to trade around $1.134, its highest level since February 2022.

What will shape markets in the coming week?
Equity market: We remain cautiously optimistic heading into Monday’s session. Several fundamentally strong stocks are now trading at appealing levels, and we believe this could attract renewed interest from investors looking to re-enter the market selectively.

Fixed Income: We expect cautious trading activity to persist next week as investors await the release of the inflation figure for March 2025, which will believe will shape market dynamics.