GTBank released its Q1 2021 numbers earlier this week showing a 9% decline in Profit After Tax.
This decline is a result of the lower yield environment where yields on government securities trended to single digits in the final quarter of 2020 and first quarter of 2021.
For GTBank, its interest income declined from 75 billion naira to 55 billion naira due to reduced trading income on its investment securities. This is an unexpected dip in securities trading for the bank.
While other Tier 1 banks such as UBA suffered a decline of 12% in investment securities income, GTBank’s decline more than doubled at 27% (17 billion naira). This is quite a worrying trend and with a challenged economy, it’s time to re-evaluate GTBank as an investment proposition.
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The bank operates a curious model in the industry where the Executive Director for Wholesale Banking also acts as the Treasurer. These are typically two distinct roles with the Treasurer reporting into the Executive Director, but it appears GTBank management is unwilling to either pay market rates for a Treasurer or release the reigns from the long-time Treasurer who is also the Executive Director. It begs the question as to whether not being fully focused on the Treasury function might be driving this sub-optimal performance.
The bank continues to rein in its costs and best-in-class in Cost-Income Ratio (CIR) metrics. However, without generating growth in its treasury activities, it might be in the early days of losing its pride of place amongst Tier 1 banks.
With the CEO, Segun Agbaje transiting from his position as bank CEO to HoldCo CEO in July 2021, it is hoped that he hands over a Treasury function that is capable of delivering robust returns GTBank has been known for.