QUARTER RESULTS (5): GTB: Core vs non-core, Forte Oil: ides of three.

G. T. BANK: CORE VS NON-CORE
It looks like the battle for the profitability of Guaranty Trust Bank PLC in 2016 will be between core and non-core banking business.
According to the first quarter figures sent to the stock market, while core business was putting good shoulders to the wheel, non- core is acting as a drag.
By the quarter to March, interest income grew marginally by 1.6% to N55833.1m but was nicely accompanied by 4.92% drop in interest expense to N15039.3m thus increasing net interest contribution to the income pool.
The same thing was repeated in fee and commission which increased more resoundingly by 39.1% to N17285.6m followed by an equally remarkable 34.4% decrease in fee and commission expense to N567.1m.
However, except for 3.99% decrease in impairment provision to N3385.9m, and 4.72% drop in other operating expenses to N15223.2m, no more helpful shoulders could be seen.
Gain from fair value of financial assets dived by 79.9% to N1171.5m, Other income tumbled 81% to N1103.9m, personnel cost increased by 1.03% to N6785m and operating lease loss increased by 7.79% to N397.1m.
Hence, GT Banks profit before tax dropped by 6.05% to N30676m in spite of the efforts by core banking and fair restraint on cost growth.
Can that be representative of full year 2016? Of course, it is too early to tell but you bet, core vs non-core has to made to move in one direction for better 2016.
G. T. BANK PLC (Nm).
                     First quarter.
                      2016.              2015
G. Earnings 75394.1.        79015.7
Interest inc. 55833.1.       54951.3
Interest exp. 15039.3.       15783.2
Impairment.   3385.9.         3526.5
Commission 17285.6.       12430.5
Comm. Exp.      567.1.            840.0
Fair value gain 1171.6.         5830.8
Other income.   1103.9.         5803.1
Personnel.         6785.0.         6715.6
Operating lease (397.1).       (368.4)
Other op. Exp.   15223.2.     15983.2
Profit before tax 30676.0.    32652.8
Profit margin %.     40.7.           41.3
FORTE OIL: IDES OF THREE.
If the unaudited first quarter results to March is anything to go by, Forte Oil PLC had better beware of challenges from three accounting heads this year: Foreign exchange losses, net finance charges and distribution cost.
Sure, according to the figures. Forte Oil had a good run within the quarter but it was that was slowed down by phenomenal growth in foreign exchange loss, leap in finance charges and dust raising distribution cost growth.
By March, Forte Oils gross profit was 18.6% up at N4805.2m after 7.68% rise in core revenue was trailed by 6.16% increase in cost of sale.
Then income from other sources had uplifted total income growth to 8.16% with own 36.4& increase to N771.7m.
In the same seemingly unstoppable stride administration cost dropped by 8.98% to N2219.6m leading eventually to 54.5% increase in profit before tax to N1301.5m.
But the point was that net finance charges 73.8% leap to N1144.4m and 31.5% increase in distribution costs had to be waded through.
More importantly, there was the 588.8% increase in loss from foreign exchange to N13.5m yet to be taken into consideration.
With Forte Oils 3.59% profit margin compared to 2.50% previously, all seems well provided the growth recorded on the three accounting heads does not go out of hand in subsequent months.
FORTE OIL PLC (Nm)
                   First quarter
                     2016.              2015
Total inc.    36373.8.         33628.5
Core Rev.    35602.1.         33062.2
Cost of sale 30796.9.        29009.4
Gross profit  4805.2.           4052.9
Other inc.        771.7.             566.3
Distribution    911.5.              693.4
Admin.          2219.6.          2425.2
Net finance  (1144.4)         (658.3)
Profit b4 tax 1301.5.            842.3
Forex gain       (13.5).             (1.96)
Profit margin % 3.59.             2.50

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