In brief
GCB Bank Plc (GCB) released its FY2022 and 1Q2023 results yesterday. The bank reported losses to the tune of GHS 593.4mn on account of impairment losses on investment securities and a sharp rise in operating expenses. On the upside, GCB is in the clear on solvency issues for now as the losses eroded 38% of the bank’s 2021 retained earnings while regulatory forbearances are in full effect. However, asset quality issues re-emerged with the bank’s NPL ratio nudging higher to 20.59% as the stock of loans and advances grew by 27.3% y/y.
Revenue outturn in 1Q2023 remained robust, driving a 20.7% increase in profit after tax. A strong increase in the stock of investment securities and credit propelled growth in interest income. GCB’s FX business continued to drive solid growth in non-funded income as the fixed income trading book shrunk in 1Q2023. Compared to FY2022, the bank’s NPL ratio remained little changed at 20.20% in 1Q2023.
FY2022 Performance: GCB suffers a deep cut
- GCB reported a loss after tax of GHS 593.4mn in FY2022, driven by a sharp rise in operating expenses and impairment loss on investment securities as a consequence of the Domestic Debt Exchange Programme (DDEP)
- Net interest income increased by 11.2% y/y to GHS 2.1bn with non-interest revenue growing by 68.6% y/y to GHS 898.2mn. Notably, the bank registered a 3-fold increase in net trading income
- Net impairment loss on investment securities resulting from the DDEP amounted to GHS 1.8bn.
- Although impairment loss on loans and advances fell by 15.6% y/y to GHS 274.1mn, GCB’s NPL ratio edged higher to 20.59% (+ 4.61pp y/y) while CAR slipped to 17.9% from 20.9% a year ago.
- Operating expenses increased by 29.1% y/y to GHS 1.6bn. Consequently, GCB’s cost-to-income ratio inched up by 2.24 pp y/y to 54.3%.
1Q2023 Performance: Strong revenue outturn propel bottom-line performance
- Profit after tax increased by 20.7% y/y to GHS 186.3mn, on the back of robust revenue outturn, notwithstanding the increase in impairment charges and operating costs.
- Net interest income increased by 34.3% y/y to GHS 655.6mn, propelled by a 34.3% increase in interest income.
- Non-interest income increased by 40.4% y/y to GHS 248.1mn, mainly propelled by a 79.3% y/y rise in trading income.
- Operating expenses increased by 37.5% y/y to GHS 494.5mn, reflecting the elevated price pressures since 2022. However, cost-to-income ratio stood still at 54.7% as operating income grew closely with operating expenses.
- Impairment charges on financial assets increased by 63.3% y/y to GHS 111.3mn. The Bank’s NPL ratio saw little improvement, declining to 20.20% in 1Q2023 from 20.59% in December 2022. GCB’s CAR stood at 18.5% (-2.40% y/y) in 1Q2023