GTBank to adopt Holdings structure, says it’s ready to go into price war for loans

Segun Agbaje, the Group Managing Director and Chief Executive Officer at Guaranty Trust Bank Plc. has announced lender’s plan to adopt holding structure to accommodate its diversification objective.

Speaking at the earnings conference with analysts, Agbaje said: “about 10 years ago, we made a decision then looking at the operating environment that we were going to shed all our subsidiaries and become completely bank-focused”.

“But if you look at the competitive landscape, what the Fintechs, Telcos, asset management companies, insurance companies are doing in the financial space.

“As an organization and with the approval of the board, it is time to consider a holding company structure”, he added.

With the Holdco, GTBank plan to have an insurance, assets management and Pension Fund Administration companies as subsidiaries.

Though the bank chief reiterated that this is subject to approvals.

Agbaje said: “If you look at what’s happening in the PFA space, volumes are growing every day”.

Meanwhile, on the group succession plan, Agbaje said his answer to will never change.

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“We have five executive directors. Our belief as a Board and as an organization is that any of those five is capable of doing the job going into the future”.

“From an organizational perspective, if we’re down to 5 executive directors who can do the job, we actually think we’re in a very comfortable place”, the CEO said.

In his reaction to analysts question about his future plan after schedule tenure expiration in June, 2021, Agbaje said he may move up into Holding company role”.

“What is in the future for me, maybe part of what will be in the future for me is to move up into our Holdco role. But this is all subject to a lot of approvals”, he added.

With development in the economy, Agbaje anticipates a tough regulatory environment.

Reacting to potential devaluation of naira and impacts on the bank capital adequacy, Agbaje said there have to be massive devaluation for GTB’s capital adequacy ratio to be affected.

“We don’t think a devaluation, at least where we sit today, there will have to massive devaluation for our capital to be affected”, he said.

He said: “if you look at the CBN transition arrangement we’re 25.6% capital adequacy. Now even if you take strict capital adequacy without the CBN transition, we are at 22%”.

Agbaje said GTB is making money every month and every quarter.

“So just like even when there was a 50% devaluation our capital adequacy didn’t suffer even at a 50% devaluation, I think, we’ll be fine”, he added.

On the group performance, he said if you look at our pre-tax forecast, we’ve only gone from N231 billion to N235 billion.

GTBank said it expects this to be a very challenging year.

“If you look at what we’ve done to our net interest margin (NIM), we dropped from 9.2% to 8%. NIM compressed because we plan to get to the 65%.

“To get to the 65%, you’ve had to lower the price of your loans. We brought down asset yields a bit by bringing down our loan pricing “, the CEO explained.

Meanwhile, in 2019, GTBank said it did N29 billion write-offs which settled its non-performing loan book down to N68 billion.

At the bank level, lender said it is going to play volume game and it is ready for price war on loans to increase market share.

“We are going to go for market share. We are ready to go into a price war for quality loans, and we have started to do that.

“So we believe that we will grow our loan book”, the CEO said.

He said GTB’s regional book is trending up nicely as well. So, the management will continue to push that.

However, he said: “if you look at our subsidiaries, they are doing better. Especially Ghana where subsidiaries today add 15% to profit”.

“This year, we are going to focus a bit more aggressively on expense and cost containment.

“I think that if you take the interplay of all that, you’ll see what is driving us this year”, he added.

Agbaje said to gain more volume, GTB will be ready to sacrifice some of the margins but arrive at the same place.

“With the growth we see on the balance sheet, I think we’ve been at least realistic about what it will translate to in PBT growth.

“That’s how we intend to drive our balance sheet this year.

“Obviously, focusing, as we’ve always done on low-cost liabilities, which is why we’re at about 85-15 ratio”, the GMD stated.

Agbaje said: “To grow balance, I think the T-bill game has gone. You can probably do a little bit of open market operation (OMO), nothing aggressive, but you can still grow your loan book”.

“For the first half of the year, we’ll look at loan growth. I think the key thing is to be very agile. From a strategy perspective, be ready to change very quickly as opportunities present themselves or headwinds appear”, Agbaje stated.

He said if macroeconomic developments continue, GTB really have to look at its asset quality.

On non-performing loan distribution, he said: “If you look at our loan book, we’re about 19% manufacturing, and then the next thing apart from the oil and gas book is then retail at about 11%”.

Government and telecoms at about 5%.

Agbaje said GTB loan book is quite insulated, about 74% wholesale, which is high-end.

He stressed that that doesn’t mean that one high end loan can’t catch a cold. So in terms of NPLs, GTBank is at a very comfortable place.

GTBank stated that NPLs to total loans is about 6.5% because of its quite aggressive classification.

While speaking on retail book, he said the first thing is that the bank doesn’t have real concerns around retail book because it was built around salary advances.

“One thing to worry about is that people start to lose their jobs, they’ll come under some pressure.

“But I really don’t see us going above 5%, 6% in terms of NPLs even with people losing their jobs”, Agbaje told analysts.

Assessing the retail performance, Agbaje said we started this thing very aggressively eight years ago.

“It’s like a well-oiled machine now, where the different things we’re doing in terms of acquisition.

“We’ve built it into our DNA.

“So what a lot of banks are just trying to get comfortable within the last 2 years, we have learned how to do over eight years, and we have a nice momentum”, the CEO said.

Agbaje downplayed agency banking, he stated that he doesn’t believe answer to uptick performance lies there.

“I don’t believe that agency banking is where the answer lies. Agency bank is just cheaper way of bricks-and-mortar.

“I think the Fintechs are beating the banks in building platforms that are quicker, faster, and cheaper and are friendlier, he highlighted.

GTBank announces Holdco plan, says it’s ready to go into price war for loans

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