Bank recapitalisaton: GTCO launches N400 billion public offer

Key Points

• GTCO launched a public offer to raise N400 billion on Monday.
• This move is in response to the CBN’s March 2024 mandate increasing capitalisation requirements for large banks tenfold.
• CEO Segun Agbaje stated the capital raise was already in the works prior to the new CBN requirements.

 

Guaranty Trust Holding Company (GTCO), a leading Nigerian financial services group valued at N1.39 trillion, unveiled its public offer to raise N400 billion on Monday.

This move comes in response to the Central Bank of Nigeria’s (CBN) March 2024 mandate, which raised capitalisation requirements for the country’s largest banks tenfold.

Despite the new CBN requirements, GTCO’s CEO, Segun Agbaje, stated that the capital raise was already planned.

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During a presentation on Monday, Agbaje defended the public offering, emphasising the need for banks to strengthen their balance sheets in light of the massive naira devaluation and the government’s ambition to achieve a trillion-dollar economy.

GTCO, which began in 1990 as Guaranty Trust Bank with the support of 42 shareholders and $2 million, faces challenges such as accelerating inflation and historical skepticism towards the Nigerian Exchange (NGX).

Agbaje made bold predictions, declaring, “There is no Nigerian company that has ever made a billion dollars in profit and we are going to be the first ones to give you that.”

Efficiency and Profitability

Agbaje highlighted GTCO’s commitment to efficiency and profitability, boasting a cost-to-income ratio of approximately 16 per cent.

“Cost has always been a source of competitive advantage,” he said, adding, “Our business model is very simple; we don’t take money just for the sake of it because we want size. We concentrate on efficiency and profitability. Our balance sheet could be three times what it is today, but we would be less profitable. The reason we’re profitable is that we’re a low-cost operator.”

Allocation of Raised Funds

GTCO plans to allocate N370 billion of the raised capital for the growth and expansion of its banking business, including recapitalisation. This includes an aggressive rollout of new branches over the next year to serve its 35 million retail customers and 2.9 million SME customers, addressing the significantly underserved Nigerian banking sector.

Additionally, GTCO aims to expand into new markets such as Senegal and bolster existing subsidiaries in Ghana, Côte d’Ivoire, and Kenya, though it will approach new subsidiary openings cautiously.

According to Agbaje, N22.4 billion of the capital will be directed towards expanding the group’s asset management and pension businesses. This strategy, he said, includes doubling down on acquisitions in Asset Management and Pension Fund Administrations, areas that currently account for 1.5 per cent of the group’s revenues.

Future Outlook

Agbaje emphasised GTCO’s long-term vision, stating, “We are not thinking of the next couple of years as baby step growth. We are thinking of the next few years as the years where we separate this bank and this organisation forever from everybody; we want a market capitalisation that Nigeria would be proud of.”

In a deliberate move to slow the growth of its loan books amid worsening macroeconomic conditions on the continent, GTCO is confident it can persuade even the most skeptical investors to buy a “slice of the orange.”

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