GCB grows interest income
GCB, by virtue of its wide distribution over the length and breadth of the country, has managed to grow its interest income by 47 per cent over the 2011 figure of Gh¢256.62 million.
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The growth is not only attributed to the bank’s intricate network of branches but also to the bank’s ability to introduce innovative products and services onto the market while carefully exploiting growth opportunities on the financial terrain.
GCB ended the 2012 financial year with a record interest income value of GH¢376.09 million which distinguishes the bank, even from its fellow tier one banks in terms of fund mobilisation and ultimately interest income.
Though the banking sector for the year 2012 operated in a challenging macro-economic atmosphere where budget deficit widened by 12 per cent, trade balance deteriorating, interest on government securities rising from 10.67 per cent to 23.12 per cent (91 day treasury bill) and local currency being severely volatile, GCB managed to grow its interest expenses marginally by two per cent. This, according to the company, was achieved through effective deployment of resources during the period, as well as proactive managing of funding costs.
Not only did GCB manage to keep its interest expense under check, it also kept its operating expense under check, while growing its total income. For the full year (2012), GCB recorded an operating expense of GH¢221.27 million, 12 per cent less than the prior period’s value resulting in a 521 per cent growth in profits before tax for the year 2012. GCB’s net earnings before tax for the period was GH¢192.85 million.
According to the bank, significant growth in revenues coupled with reductions in operational costs as well as a marginal decline in impairment charges resulted in a net earnings after tax of GH¢142.92 million which was not only the highest ever recorded by the company but was represented by a year on year growth of 696%.
Half year 2013
The bank extended its impressive financial performance for the full year (2012) into the current financial year.
For the first six months of operations, the bank recorded a total interest income of GH¢256.76 million, representing a growth of 71 per cent compared to the prior period. The premier bank in Ghana saw its profits before tax growing by 81 per cent despite significant growth recorded in operating expenses as well as interest expenses.
For the half year period, GCB’s net profit after tax was GH¢90.43 million, representing a growth of 80 per cent year on year.
Rate analysis
Ghana Commercial Bank recorded an increase in gross profit margin for the full year (2012) from 81 per cent in 2011 to 86 per cent in 2012.
For the half year of 2013, GCB’s net profit margin was 35 per cent from 33 per cent the prior period. This signifies an improvement in the level of profitability of the bank for the periods under review.
Gross profit margin assesses the firm's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold. Gross profit margin serves as the source for paying additional expenses and future savings. A higher gross profit margin is preferred.
Similarly, net profit margin relates a company’s profits to the level of sales and thus indicates how much profit a company made for each cedi of sales. A company who generates a higher level of profit for each cedi of sales is more profitable.
In terms of liquidity, GCB recorded 1.19 as current ratio or the year 2012 and 1.13 for the half year 2013. This means that GCB is able to cover all its current obligations as a bank which is likely to impact positively on the operations of the entity in serving its clients.
Generally, the higher the value of the liquidity ratio, the larger the margin of safety that the company possesses to cover short-term debts A company's ability to turn short-term assets into cash to cover debts is of the utmost importance when creditors are seeking payment.
Stock market performance
GCB over the years carries the stigma of being one of the most volatile stocks on the Ghana Stock Exchange.
The equity which has fluctuated between highs of GH¢5.38p and lows of GH¢0.45p has seen its shareholders make gains of over 265 per cent in a single year and also make losses of over 33 per cent also in a single year.
Despite market sentiments that GCB is a risky stock (i.e. volatile) detailed analysis reveal that, the equity carries a beta of 0.60. This means, GCB is not as volatile as people believe. A stock which is considered to be volatile is one who has a beta greater than one.
GCB’s market performance over the years compared to key economic and financial indicators shows an over-performance of the stock comparatively over the past five years. GCB has recorded a capital appreciation of 111.06 per cent between December 31 2007 and 31 December 2012.
Extending this into 2013, GCB has returned 440 per cent to investors in terms of capital gains for the five year period making it one of the most profitable equities on the GSE in terms of returning value to investors. For the first eight months of trading on the GSE, GCB has seen its price rise from GH¢2.10 a share to close at GH¢5.38 representing a capital gain of 156 per cent.
GCB’s impressive financial performance over the years as well as high liquidity of the stock on the GSE has been responsible for the impressive rise in value of the stock over the period.
With over 265 million of its shares issued and outstanding to the public, Liquidity for shareholders of GCB has proven not to be a problem at all.
So far this year a total of 7.39 million GCB shares have exchanged hands with a turnover figure of over GH¢33 million.
Source: NDK Financial Services Ltd/Graphic Business