REVIEWING the 2001 financial results declared by Global Bank Plc, during our Seventh Annual Bank Review, we emphatically stated that the bank was on the threshold of a momentous leap into the big league of top performers in the industry. During that year, apart from earnings and profit performance, most other indicators were below average but the bank created the structures and instituted processes that were considered necessary to compete with the top banks in the industry. It was not surprising therefore that during the 2002 financial year, the bank posted results that truly surpassed the industry average. During that year, we authoritatively reported that the bank made a remarkable entry into the top 30 of the industry by virtually all absolute indicators and top 20 by most relative measures of performance. By 2003, though earnings declined, yet it recorded another above average result. A review of the recently released result for 2004 shows that Global Bank has truly consolidated its place in the top performance chart in the industry.
As at end of the period, total asset had risen to N20.10 billion against just N4.37 billion in 2000. It had equally grown branch network to 22 as against only three in 2000.
It is clearly obvious that the bank has made tremendous progress in its rapid growth strategy adopted as part of an ambitious five-year strategic plan launched in 2001/2002 financial year. In the course of 2004 financial year, it added a unique product and re-packaged an existing one in deference to demands of customers. Specifically, the new product known as Global Education Savings Plan (GESP), has very attractive features related to the child, his education and the future. It promises a lot of convenience for customers who desire the best for their children or wards. The Bank also re-launched the Global Savings Plus (GS+) with a lot of features of convenience associated with current account, and attractive interest rate associated with deposit accounts.
The latest performance rating report for 2004 released by the foremost industry specialist, P.A. Data Rating Services, Global Bank recorded another above average result with earnings and risk quality being the more remarkable.
EARNINGS AND PROFITABILITY
As in the immediate past years, Global Bank in 2004, continued to savour the gains of its incursion into retail business and successful strategic initiative launched in 2002. Perhaps, the gains and successes can be summarised by growth in virtually all indicators of performance. But growth in earnings, grew from N3.20 billion in 2003 financial year to N4.05 billion in 2004 or 27 per cent growth rate. Earnings has not just increased, the margin associated funding business improved consistently since 2000, notwithstanding the prevalence of shrinking martins in the industry. Specially, net interest margin which was about 22 per cent in 2000 increased through 31 per cent in 2001, 33 per cent in 2002 36 per cent in 2003 and eventually to 38 per cent in 2004.
Remarkably, while the bank placed within the industry top 30 in total assets, this profit figure placed in the top 20 and was achieved at a time profits trended downwards in the industry. In relative terms, it represented 30.2 per cent return on average shareholders’ fund, up from 27.9 per cent in 2003. Although the bank did not achieve its 40 per cent target, it is remarkable that this performance is within the top 10 of figures already reported in the industry. Accordingly, earnings and profit performance of Global Bank was rated above average (B+) in the P.A. Data Rating Scheme.
SAFETY LEVEL AND CAPITALISATION
During its second major restructuring exercise of 2001/2002 period, Global Bank identified re-capitalisation as a key aspect of that exercise. In that year alone the bank injected new funds and retained substantial profits up to the tune of N500 million, thus increasing shareholders fund to N1.30 billion. As at 31st March, 2004, the fund had accumulated about N2.31 billion.
As the industry grapples with the issue of consolidation, Global Bank is one of the banks that appeared least rattled by the challenges posed by the reforms as it has concluded arrangements to meet the requirements. Industry watchers believe really that the bank has the network to guarantee a smooth consolidation.
LIQUIDITY AND RISK QUALITY
To informed Analysts, 2004 financial year marked the best year for Global Bank in the area of how it managed its balance sheet for quality. The most remarkable aspect of this impressive result is that it was also at that period’s ending that the bank accommodated the highest relative proportion of portfolio risk over the past eight years.
In fact, estimated credit risk proportion of portfolio increased markedly from 44 per cent in 2003 to 62 per cent in 2004. This increase was largely explained by more than 100 per cent expansion of the risk asset portfolio. But, to the credit of risk managers of the bank, non-performing loans ratio declined from 25 per cent to 10 per cent. It had witnessed marginal increases since 2001. This implied that more of the portfolio was performing according to contractual terms, and in accordance with prudential standards. This helped in the substantial improvement witnessed in earnings and profitability measures as less bad debts are generated while more interest income are released to profit and loss Accounts. But the move towards a more risk accommodating portfolio strategy necessarily amounted to reduced liquidity in 2004.
The proportion of vulnerable deposits invested in cash, bank assets and treasury securities came down from 74 per cent to 51 per cent, while nonetheless remained within the acceptable threshold. It was substantially above the specified liquidity ratio of 40 per cent and means reasonable flexibility to the bank in satisfying the needs of an expanding customer base.
Analysts believe that irrespective of the reduced liquid asset proportions, the improvement in asset quality was more remarkable in forming a wholistic picture of asset and liability risk in 2004. The impressive aspect of this performance is that earnings improved without compromising risk status. Infact, risk quality also improved.
SUMMARY
As the industry consolidates in deference to regulatory reforms, Global Bank will be going into arrangement with its larger “family” network as a highly profitable and low-risk package. Infact, it had developed an earnings base that is not just attractive for its numbers but also for its quality. This has been aptly demonstrated by the strength of the results released for 2004 for which the foremost rating agency — P.A. Data Rating Service summarised as above average performance. The character of this quality has been tried, tested and proved over the last three years.
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