Guaranty Trust Holding Company (GTCO) posted a net profit of N905.6 billion in the first half of the year as a combination of favourable factors helped boost its bottom line to the highest level ever achieved by any listed company in Nigeria.
The figure is roughly double the after-tax profit of Dangote Cement, Nigeria's largest company by market value, last year.
This rather remarkable result reflects the magnitude of the fortune that the country's lenders continue to make from harsh macroeconomic trends such as inflation and currency devaluation that affect manufacturers and other businesses.
The perfect picture of how the financial institution managed to turn the situation to its advantage is perhaps most evident in the net profit margin, which represents what proportion of revenue has been converted into profit, often calculated as profit after tax as a percentage of revenue.
Net profit margin for the period was 65 percent, compared with 41.7 percent in the same period last year.
Gross profits at GTCO, Nigeria's largest lender by market value, more than doubled to 1.4 trillion from a year ago, according to its audited earnings report released on Wednesday.
Other income, dominated by unrealized gains on fair value of financial instruments and unrealized gains on forward transactions, amounting to N630.3 billion accounted for the bulk of income.
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This reflects how much the top-tier lender's revenue stream has diversified in recent years, as a devaluation of the naira earlier this year created significant new revenue streams for lenders like GTCO, which have investments in foreign currency-denominated assets.
In January, the Central Bank of Nigeria weakened the naira by 34.3 percent against the dollar, causing the naira-dollar exchange rate to jump from 895.3 at the beginning of the year to 1,529.1. This, in turn, created a bonanza for such banks after they converted their dollar assets into naira.
GTCO posted foreign exchange translation gains of N153.9 billion during the period, up from N103.7 billion a year earlier. This boosted its total comprehensive income nearly three-fold to over N1 trillion.
The unprecedented appreciation gains that lenders are reaping from exchange rate volatility have prompted the Nigerian government to propose a one-time 50 percent tax on such windfalls that banks could levy.
The Senate raised the rate to 70 percent earlier this year before approving it, a measure that banks, rating agencies and consulting firms consider too aggressive and capable of straining lenders' finances.
Net interest income, a key profitability metric that measures the difference between what lenders charge on loans or earn on financial assets and what they pay on loans or for keeping depositors' money, rose 177 percent to N491.5 billion.
GTCO achieved this thanks to an aggressive stance by Nigeria's monetary authorities this year, which has sharply increased borrowing costs.
The CBN has raised rates by 1,525 basis points from May 2022 in one of its longest rounds of rate tightening on record, hoping to moderate inflationary pressures that have fuelled a cost-of-living crisis in Africa's most populous country.
GTCO’s pre-tax profit for the period more than tripled to N1 trillion, while profit after tax advanced to N905.6 billion from N280.5 billion.
The financial services group completed a N400.5 billion public offering earlier this year, aimed at meeting a new central bank minimum capital requirement.