Nigerian financial services group Guaranty Trust Holding Company (GTCO) reported higher interest income in the first quarter of the year but saw its net profit decline as rising costs and a sharp increase in tax expenses weighed on earnings.
The lender said interest income rose to 458.5 billion naira (US$1.1 billion), up from 386 billion naira in the same period last year, driven mainly by stronger returns from loans and advances to customers.
Despite the growth in top-line income, net profit fell 15.4 percent year-on-year, highlighting the pressure mounting costs are placing on profitability in Nigeria’s banking sector.
The company’s net interest income, a key measure of core lending profitability, increased 12 percent to 356.3 billion naira, supported by higher lending activity and improved interest yields.
However, much of the gains were offset by a significant rise in expenses, particularly a sharp increase in income tax charges, which more than doubled to 84.8 billion naira during the period.
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Analysts say the higher tax burden reflects both improved earnings quality in prior periods and changing fiscal dynamics affecting corporate balance sheets in Nigeria.
GTCO also set aside 7.9 billion naira for impaired loans, a 41 percent decline from the previous year, suggesting improved credit performance and lower expected defaults across parts of its loan book.
Non-interest revenue provided additional support, with fee and commission income rising 4 percent to 69.8 billion naira. Growth was driven by increased digital banking activity, credit-related fees, and account maintenance charges.
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The group’s fintech subsidiary, HabariPay, contributed 3.7 billion naira in net profit, while its asset management and pension businesses added 3.4 billion naira and 480.7 million naira respectively, underscoring the group’s gradual diversification beyond traditional banking.
However, not all subsidiaries performed strongly. GT Bank Tanzania recorded a small net loss, highlighting uneven performance across regional operations.
The group also faced volatility in financial markets, booking unrealised fair value losses of 40.4 billion naira on financial instruments. This contrasted sharply with other income gains recorded a year earlier, contributing to weaker overall profitability.
Foreign exchange translation losses from international operations further weighed on results, reflecting ongoing currency volatility in some of GTCO’s operating markets.
Profit before tax edged up slightly to 302.9 billion naira from 300.3 billion naira, but after-tax profit fell to 218.1 billion naira from 257.9 billion naira, underscoring the impact of taxation and non-core losses on the bottom line.
The results come at a time when Nigerian banks are navigating a challenging operating environment marked by high interest rates, currency fluctuations and tighter regulatory scrutiny.
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Despite the pressure on profits, GTCO continues to expand its footprint and diversify its revenue base. Last year, the group completed a cross-border listing, making its shares available on the London Stock Exchange, a move aimed at boosting international investor participation and liquidity.
Banking analysts say the group’s underlying performance remains resilient, with strong interest income and improving credit quality offsetting some of the volatility in other areas.
However, they caution that rising tax obligations and market-driven losses could continue to pressure earnings if macroeconomic conditions remain unstable.
For now, GTCO’s results reflect a broader trend in the banking sector: solid core lending growth, but increasing strain from costs, taxation and financial market volatility.
As Nigeria’s financial system continues to adapt to shifting economic conditions, investors will be watching closely to see whether revenue diversification and cost controls can restore stronger profit growth in the quarters ahead.
