GTCO: Maintaining a deliberate approach to growing investors wealth


Sustainable financing in the advancement of economic growth and development is critical, especially in today’s banking space. Financing obviously drives lending activities, and any businessperson would expect that these loans would in return earn interest and ultimately impact bottom line.

Guaranty Trust Holding Company Plc over the years have proven to be robustly financed; Fitch-Rating report came as no surprise when it rated the bank a “B” in viability and Issuer default ratings.

Fitch’s only concern is GTB’s concentration risk; Lending predominantly to corporates in the oil and gas sector. Although this risk is mitigated by good client selection, collateral, and financial hedges.

Given Guaranty Trust Bank’s impressive rating and robust capital, stakeholders’ wanted to see more risks. Their expectation at the start of 2021 was for the bank to possibly expand lending rate, and make more money (profit).

Now how have they fared? Did they take on more lending risks? Yes. But did they make more profit? No.

They ended the year 2021 with a profit of N 174.8 billion, 13.2 percent worse off than the N201.4 billion recorded in 2020. Despite how awkward this may sound; the performance wasn’t completely heinous because in 4 key parameters, GTB showed off fine improvements.   These improvements could be catalyst for another decade of supremacy.

The company’s annual statement for 2021 shared last week, indicates that the attention of management may have been focused on Lending, Retail Banking Segment, Extension of financial services to unbanked individuals and Full digitalization.

Guaranty Trust Holding Company Plc magnified their lending activities by N10 billion in just one year (2021). Their lending momentum was intense, rewarding but unfortunately inadequate to earn better than they did in 2020. Net interest income in 2021 was N220.6 billion, whereas in 2020, they racked N253.7 billion.

Lending of course improved in 2021, but its growth was eclipsed by GTB’s shortcomings in attracting income from investment securities. This is the primary reason gross earnings suffered.

Improvement in Retail Banking Segment provides another positive for stakeholders. Retail segment contributed 28.6% of total revenue and by 2021 has grown to as much as 31.1%. Retail banking generally has become like a priced ruby in Nigeria’s banking sector. Banks are seemingly obsessed with outdoing each other in taking up more market share.

Guaranty Trust Holdings may have set their minds on growing this segment from the start. In all fairness, they appear to be doing so, but unconsciously at the expense of their corporate segment.

This corporate segment has been GTB’s biggest, largest, and most profitable since time immemorial. Last year, the bank ceded reasonable grounds (10 percent) in its operations and revenue generation.  GTB’s management must find a way to maintain at the very least, exploits in this corporate segment too. Otherwise, the good works from retail will eventually be rubbished by inefficiencies from corporate.

Another ray of hope, from 2021 fiscal year’s performance is the bank’s quest to extend banking services to the unbanked. ‘Banking the unbanked’ has been a consistent talking points for cryptocurrency advocates. Whilst Nigeria’s apex bank and regulatory body may not share their ideals and methods, they embrace the sentiment in the communicated message. “Financial inclusion is vital”

So, with how competitive the Nigerian banking sphere has become, financial inclusion is a current area where banks are keen to exhibit omnipotence.

Guaranty Trust Bank makes a fair case for themselves so far.  With 21 agent banking locations to their portfolio, they successfully opened 888,503 new accounts in the 12 months of analysis. These accounts attracted deposit to the tune of N809 million.

Guarantee Trust Holding Company Plc received most innovative bank in Nigeria 2021 award according to the World Finance Banking Awards. The bank is on course to go fully digital on all fronts. Customers now print instant ATM cards by themselves without having to fill any forms or queue at locations; amongst other laudable digital enhancements.

More often than not, banking decisions bear fruits in the long term. Stakeholders will hope that these promising areas begin to impact profit in the soonest. But if we judged strictly on bottom line, Guaranty Trust Holding Company should be doing a whole lot better than N174.8 billion in this age.

Article was written by Tobi Aina

Culled from Nairametrics