GTCO, banking’s efficiency leader, eyes $1 billion profit as it begins ₦400bn raise

Guaranty Trust Holding Company (GTCO), a Nigerian financial services group valued at ₦1.39 trillion, flagged off its public offer to raise ₦400 billion to meet new capital requirements on Monday. While the Central Bank raised capitalisation requirements for the country’s biggest banks tenfold in March 2024, Segun Agbaje, GTCO HoldCo’s CEO, claimed the bank had a capital raise in the works anyway. 

In a passionate presentation on Monday, Agbaje defended the public offering, arguing that given the massive devaluation of the naira and the government’s stated goal of having a trillion-dollar economy, banks needed to shore up their balance sheets. 

GTCO, which began in 1990 as Guaranty Trust Bank backed by 42 shareholders and $2 million, must make a bull case because of accelerating inflation and historical skepticism of the Nigerian Exchange (NGX). The occasion called for bold predictions.

“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,” said Agbaje.  

Beyond profitability, the financial services giant talked up its ruthless efficiency. “Cost to income ratio is about 16%. That means you’re running your organisation on blood. Cost has always been a source of competitive advantage.”

“Our business model is very simple; we don’t go out and 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. “

What will GTCO use the money for?

₦370 billion of the total capital raised will be used for growth and expansion of the banking business (including recapitalistion) with a plan to “aggressively” roll out more branches in the next year. With 35 million retail customers and 2.9 million SME customers, GTCO believes the Nigerian banking sector is still significantly underserved.

It will also expand to new countries and grow existing subsidiaries like Ghana, Cote d’Ivoire, and Kenya. Despite these plans, the company will take a cautious approach to opening new subsidiaries.

The group also plans to double down on acquisitions in Asset Management and Pension Fund Administrations, having used the strategy to drive growth. Both subsidiaries account for 1.5% of the group’s revenues. 

“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,” Agbaje said. 

Having deliberately gone slow in growing its loan books as macroeconomic conditions on the continent worsened, GTCO believes it has the ingredients to convince the worst of skeptics to buy a “slice of the orange.”