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G
uaranty Trust Bank (GTBank) Plc has achieved a rear feat in the Nigerian banking industry.
The lender’s cost to income ratio (CIR) has hit an all-time low of 38.10 percent in 2017, from 43.53 percent as at December 2013.
Operational efficiency in banking is commonly highlighted by cost/income ratios – that is, the ratio of total operating costs (excluding bad and doubtful debt charges) to total income (the sum of net interest and non-interest income).
It is the only lender in Africa’s most populous nation that has consistently contained cost over the last five years while clutching on to the position as the most efficient. This also means it has be able to use fewer hours, lower costs than peers.
Efficiency is when a bank turns input into output while utilizing the resources of shareholders to bolster revenue.
GTBank attributes rigorous efficiency to distinctive cost containment model without hurting continuous investment in its people, technology, infrastructure and digitalization.
According to the lender’s annual report for 2017, Operating expenses (OPEX) growth moderates to 8.5 percent, which is well below the Nigerian double digit inflation rate of 15.4 percent in December 2017.
“Cost structure of other funding sources helped complement gains recorded on Opex with resultant moderate growth in overall cost of funds by 36 bps to 3.2 percent in FY 2017 from 2.8 percent in FY 2016,” said the bank in its 2017 consolidated financial statement.
GTBank’s superior cost/income ratio provides it with a competitive advantage over other players. As pressures on efficiencies continue, other banks in Nigeria must move beyond tactical cost reduction if they want to catch the market leader.
GTBank ended 2017 financial year with double digit growth at the top line and bottom line, as margins continue to improve.
Profit before tax rose by 21 percent to N200.24 billion in December 2017 from N165.13 billion the previous year. Profit after tax followed the same growth trajectory as it grew by 29 percent to N170.47 billion in the period under review from N132.28 billion as at December 2016.
The strong growth in profit was driven largely by effective balance sheet management; with impressive returns from earning assets, complemented by growth in Fees and Commission income which was strong enough to offset the moderate growth in Cost of Funds & Operating Expenses.
BALA AUGIE
