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GBTI exhibits resilience

Thursday, November 23, 2017

As Guyana’s second largest bank, Guyana Bank for Trade and Industry Ltd (GBTI) experienced challenges in 2016, but still managed to record a higher profit. Its parent company is Secure International Finance Company Inc., which owns 61 per cent of the bank and is part of the Beharry Group of companies.

Let us now review GBTI’s results to December 31, 2016.

Changes in financial position

Total assets rose by 2.3 per cent from G$96.16 billion to G$96.37 billion (about TT$3.14 billion). Almost G$23 billion of its total assets are held in foreign currency, mainly the US dollar. Net loans and advances declined to G$45 billion from G$48 million. At the gross level, its exposure to households increased to G$13.5 billion from G$12.7 billion. Its gross exposures to all other sectors declined.

Services and distribution ended at G$24.5 billion from G$25.7 billion while agriculture closed at G$5.8 billion from G$6.4 billion. Loans to manufacturing ended at G$3.8 billion from G$4.4 billion and mining and quarrying dropped to G$1.22 billion from G$1.97 billion. Impairment allowances increased to G$3.4 billion from G$2.9 billion.

Investments increased from almost G$20 billion to G$22.2 billion. Within the available-for-sale category, Guyana treasury bills rose from G$5.6 billion to G$7.4 billion and corporate bonds advanced to G$8.04 billion from G$6.1 billion.

In contrast, foreign government securities fell to G$6.1 billion from G$7.7 billion. Under the held-to-maturity category, unlisted investments declined to G$298.7 million from G$249.1 million.

Property and equipment edged up to G$7.07 billion from G$6.99 billion; within this grouping, only capital work in progress increased to G$366 million from G$127 million.

Helped by increased liquidity in the banking system, cash resources increased to G$21.7 billion from G$18.6 billion. Excess reserves with the Guyana Central Bank climbed to G$2.58 billion from G$1.09 billion.

The required reserves ended at G$9.75 billion from G$9.49 billion. However, cash in hand declined to G$1.9 billion from G$2.5 billion.

Total liabilities edged up to G$83.9 billion from G$82.99 billion. About G$5.6 billion of its liabilities are denominated in foreign currency, primarily the US dollar.

Customers’ deposits inched up to G$82.9 billion from G$82.3 billion. Both demand and savings deposits registered increases; the former closed at G$20.5 billion from G$19.1 billion while the latter ended at G$45 billion from G$43 billion. Term deposits fell to G$17.4 billion from G$20.1 billion.

Other liabilities advanced to G$1.05 billion from G$690 million. The largest increase was shown under “others”, which closed at G$558.4 million from a negative G$51 million in 2015. Accrued interest on deposits increased to G$150 million from G$136 million. Taxation declined to zero from G$104 million while unpresented drafts fell to G$26 million from G$248.5 million.

Equity growth

Total shareholders’ equity grew to G$14.42 billion from G$13.16 billion.

Retained earnings advanced to G$12.9 billion from G$10.9 billion. The net profit of G$2.03 billion along with a transfer of G$685.5 million from the general banking risk reserve enhanced the brought forward

balance while dividends of G$680 million lowered the closing figure.

The share capital was stable at G$800 million for both periods. The issued and weighted average number of shares outstanding was unchanged at 40,000,000; therefore, the book value of each share improved to G$360.61 from December 2015’s G$329.01.

Revenues, profit

Total revenue expanded by 21.2 per cent from G$6.1 billion to G$7.4 billion (about TT$241 million).

Net interest income improved by almost 7 per cent to G$5.05 billion from G$4.72 billion. The interest income component rose to G$5.96 billion from G$5.63 billion. Here, interest on loans and advances was stable at G$4.5 billion for both periods. However, interest on investment securities advanced to G$1.41 billion from G$988 million while other interest income fell to G$66 million from G$136 million.

Interest expense was marginally higher at G$912.3 million from G$906.1 million.

Other income climbed by almost 70 per cent to G$2.35 billion from G$1.38 billion. Commissions rose to G$513 million from G$455 million while exchange trading and revaluation gains fell to G$613 million from G$918 million. However, rental and other income soared from G$10.6 million to G$1.23 billion; this mainly reflected its new gold trading operations.

Operating expenses rose by 37 per cent to G$3.97 billion from G$2.89 billion. The largest component, other operating expenses, tripled to G$1.65 billion from G$544 million; this mainly mirrored increased trading activity at its subsidiary, GBTI Property Holdings Inc., which is active in real estate management and gold trading. Most other components were within range of the previous year.

Net loans provisioning increased by 45 per cent to G$899 million from G$621 million; this reflected higher provisions particularly for loans outstanding beyond 360 days, which rose to G$8.8 billion from G$7.1 billion.

The results from its associated company, Guyana Americas Merchant Bank Inc., improved from a loss of G$3.5 million to record a small profit of G$143,000.

These changes saw pre-tax profit register at G$2.53 billion from 2015’s G$2.59 billion. Despite a statutory tax rate of 40 per cent, the effective tax rate declined to 19.7 per cent from 26 per cent while the applicable tax fell to G$500 million from G$674 million. This reduction was helped by greater amounts of tax exempt income and a prior year’s credit.

Consequently, the net profit ended at G$2.03 billion from G$1.91 billion. That result translated to EPS of G$50.81 compared with G$47.82 for 2015.

Divisional highlights

The banking segment suffered from higher expenses, including loan provisioning. After allocating G$900 million to loan impairment expenses, its net interest income registered at G$2.63 billion. In addition, other income mostly reflected commissions.

No expenses are allocated to the treasury function, which benefitted from higher income on available for-sale securities. The other income component mainly comprised exchange trading and revaluation gains.

There appears to have been some reallocations between the two major segments from the 2015 presentation.

The start-up of gold trading was accompanied by higher expenditure, which restricted its profit contribution.

HY results to June 2017

GBTI was able to resume significant correspondent banking relationships, which relieved the pressure on the delivery of foreign exchange supplies.

Total assets to June 2017 closed at G$100.3 billion from G$98.4 billion as at December 2016. Total income for the period declined to G$3.55 billion from G$3.99 billion while the after-tax result ended at G$603 million from G$962 million; that result translated to EPS of G$15.07 versus G$24.04. The bank declared an interim dividend of G$4.00 (2016: G$6.00).

The major contributor to the lower profit was the full provision for the fraud committed against the bank earlier in 2017. Between March 21 and 22, 2017, Saddiqi Rafeek Mohamed Rasul, a gold dealer, fleeced the Bartica branch of GBTI of G$964 million (about TT$31.4 million) by fraudulently cashing six cheques drawn against his account at Citizens Bank.

After it was discovered that a senior manager at the Bartica Branch had authorised the transactions, she was sent home. Following the receipt of the funds from GBTI, Rasul’s account at Citizens Bank was closed. This matter continues to occupy the attention of the Guyanese police and other officials and GBTI is hopeful that the matter can be concluded by the end of 2017.

Dividends share price

The dividends for both 2015 and 2016 fiscal periods amounted to G$17.00 per share.

GBTI’s share price closed at G$470.00 on December 31, 2015 and ended at G$448.00 as at last December, reflecting a one-year decline of 4.7 per cent. On November 13, 2017, the price closed at G$450.

At that price and based on a trailing dividend of G$15.00 (G$11.00 final plus G$4.00 interim), the yield is 3.33 per cent. Based on trailing EPS of G$41.84, that price reflects a P/E multiple of 10.76 and a premium of almost 25 per cent to its year-end book value of G$360.61.

In the next article, we will turn the spotlight on St Kitts-Nevis-Anguilla Trading and DevelopmentCompany Ltd (TDC).


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