By Jeph Ajobaju, Chief Copy Editor
Up to the first quarter of 2021 (Q1 2021), before Miriam Olusanya became Managing Director on July 14, it was like Guaranty Trust Bank (GTBank) was minting money for the Central Bank of Nigeria (CBN).
The bank’s net interest income in Q1 2020 was ₦64.3 billion, an increase of more than ₦6 billion above ₦58.2 billion in Q1 2019.
Foreign exchange (forex) revaluation gains rose from ₦2.6 billion in Q1 2019 to ₦8.4 billion in Q1 2020 results, an increase in revenue from arbitrage currency trading.
This, according to Nairametrics, suggests GTBank made better currency plays, which also produced net increase in other income of ₦2.9 billion.
Yet, one lone item was baffling, despite all strides in profitability, forex gains, and even an increase of more than N1 billion in net gains on financial instruments which held at fair value through profit or loss.
Jump in restricted deposit
GTBank’s restricted deposit jumped by ₦205 billion in Q1 2020 compared to just ₦17.6 billion Q1 2019, a whopping 1,063 per cent, the result of policy changes by the CBN in minimum Loan to Deposit ratio (LDR) of 65 per cent.
In Q1 2019, Nairametrics adds, the CBN mandated banks to increase the percentage of customer deposits loaned out from 60 per cent to 65 per cent in order to stimulate the economy through greater lending to the real sector.
The CBN sanctioned banks that failed to meet the directive with fines of up to ₦600 billion by moving their funds to the Capital Reserves of banks.
In Q1 2021, the CBN debited ₦1.4 trillion from the vault of banks that violated deposit ratio policy (LDR).
Collateral effects
GTBank in its 2020 forecast of Nigerian macroeconomic and banking sector trends had noted that:
“The new minimum Loan to Deposit ratio (LDR) of 65 per cent with a 150 per cent weight on SME, Retail, Consumer and Mortgage loans and levy of additional CRR on 50 per cent of the shortfall in the event of non-compliance, for banks could bring about some unintended consequences.”
The collateral effects, as rightly projected by GTBank, were visible in its financial results which showed an increase of ₦197.7 billion from restricted deposits in 2019 and other assets of ₦577 billion in 2019 to ₦775 billion in 2020
The value of its restricted deposits due to CBN’s CRR rose from N443.6 billion in Q4 2019 to N639.4 billion in Q1 2020.
Per Nairametics, the effect could be seen in cash which dropped from ₦593.5 billion in 2019 to ₦482.3 billion in 2020, the result of overall reduction in cash in hand, balances held with other banks, unrestricted balances with the CBN, and money market placements from individual Q1 2019 results.
GTBank simply disclosed the change as part of CBN’s cash reserve requirement, and observers wonder what effect this may have on GTBank’s operational requirements as the economy plunges deeper into uncertainty.