GTBank reports full year PBT of N238.1billion

Guaranty Trust Bank plc, GTB, has released its audited financial results for the year ended December 31,2020 to the Nigerian and London Stock Exchanges.

READ ALSO: Equities market gains over N100bn as investors buy Zenith, GTBank, others

A review of the result shows improved performance across all key financial metrics in the face of theunprecedented challenges brought on by the COVID-19 pandemic, reflecting the quality of past decisionsand reaffirming its position as one of the best managed financial institutions in Africa.

The Group reported profit before tax of N238.1billion, representing a growth of 2.8percent over N231.7billion recorded in the corresponding year ended December 2019.

The Group’s Loan book (Net) grew by 10.7percent from N1.502trillion recorded as at December 2019 to N1.663trillion in December 2020, while Customers’ deposits increased by 38.6percent from N2.533trillion in December 2019 to N3.509trillion in December 2020.

Guaranty Trust Bank’s Balance sheet remained well structured, diversified and resilient with Total assetsand Shareholders’ Funds closing at N4.945trillion and N814.4billion respectively.

Full Impact CapitalAdequacy Ratio (CAR) remained very strong, closing at 21.9percent, while Asset quality was sustained as NPLratio and Cost of Risk (COR) closed at 6.4percent (Bank: 5.9percent) and 1.2percent (Bank: 1percent) in December 2020 from 6.5percent (Bank: 6.2percent) and 0.3percent (Bank: 0.2percent) in December 2019 respectively.

Commenting on the financial results, the Managing Director/CEO of Guaranty Trust Bank plc, SegunAgbaje, said; “2020 was arguably the most challenging year that the world has faced in decades. In suchunprecedented times, we sought to live out the full extent of our values; safeguarding lives and livelihoodsfor our people, our customers and across the communities where we operate. We were on solid footinggoing into 2020; the strength, scale and liquidity of our balance sheet, coupled with the quality of our pastdecisions and the efficacy of our digital-first customer-centric strategy gave us the resilience and flexibilityto navigate the economic shocks and market volatility that dominated the year.”

He further stated that; “Amidst the many challenges that persist, we remain ardent believers in Africa’sgrowth potential. Our world is increasingly digital, and we see it opening new and exciting opportunities forempowering people and uplifting our communities. With our commitment to deepening customerrelationships and intense focus on delivering innovative financial solutions, we enter 2021 well-positionedto lead this new world.”

Guaranty Trust Bank plc continues to post the best metrics in the Nigerian Banking industry in terms of allFinancial Ratios i.e. Post-Tax Return on Equity (ROAE) of 26.8percent, Post-Tax Return on Assets (ROAA) of 4.6percent, Full Impact Capital Adequacy Ratio (CAR) of 21.9percent and Cost to Income ratio of 38.2percent.


GTB Habari pay

ANALYSIS: Can GTBank replicate WorldPay in Africa with HabariPay?

It took two acquisitions, for WorldPay to emerge among the top three largest payment processing companies in the world…

Before WorldPay became a globally renowned payment processing company, it was merely providing end-user payment gateway as a subsidiary of National Westminster Bank in 1995.

READ ALSO: CBN/NIRSAL reopens portal for MSMEs, Individuals To Access Up To N25m

It took two acquisitions, one in 2002 by Royal Bank of Scotland Group and the second by Fidelity National Information Services (FIS) in 2019, and a series of expansion projects for WorldPay to emerge among the top three largest payment processing companies in the world.

The firm now has a 42 percent market share in the UL payment transactions and a wide reach into online transactions through its global e-commerce division.

Guarantee Trust Bank (GTBank), Nigeria’s fifth-largest bank by customer deposits, is attempting to replicate the success of WorldPay in Nigeria and Africa. The bank’s playbook will be borne and perfected by HabariPay, a fintech company it is planning to deploy later this year.

Alongside banks like Access Bank and Sterling Bank, GTBank had applied for a holding company (Holdco) structure from the Central Bank of Nigeria. In November 2020, the banks announced they have been granted an approval-in-principle (AIP) by the CBN. All that is left is formal approval.

An AIP usually takes six months. But GTBank is not waiting until the approval arrives in the mail before it sets out. The bank is currently shopping for fintech talents and is quick to inform potential candidates about the mission to make HabariPay a fintech unicorn.

Habari 1.0

A search on the Google Store would not come up with Habari Pay but just Habari. It is most likely that the bank intends to replace the existing Habari product with the Habari Pay.

Nonetheless, Habari, possibly adapted from the Swahili word that translates to ‘information’, was unveiled by GTBank 0n 23 November 2018, at an elaborate event attended by popular personalities in entertainment.

Habari was created as a platform to offer users direct access to the largest catalogue of local and foreign music online, a seamless shopping experience, and an exciting way to connect with friends, amongst other features.

Habari was, among other things, GTBank’s most ambitious effort at reinventing itself.

Segun Agbaje, CEO of the bank, described the platform as the bank’s way of reimagining the role of banking.

“By reimagining the role of banking and driving innovation in how we serve customers, we have built a platform that is less about us as a bank and more about the customers and everything they need to enable their lifestyle,” Agbaje said at the time.

Habari was the first mobile in Nigeria created by a financial institution that focuses on enabling people’s needs and lifestyles rather than providing a limited bouquet of banking products. But the jury is still out on how much of a success that Habari has been. Nigeria’s e-commerce space continues to be dominated by the likes of Jumia, Konga, Jiji, and new entrants such as Flutterwave, and Paystack.

Some experts have said the reason for Habari performing below expectation may have more to do with a traditional banking culture that does not prioritise the customer. But the bank would likely argue that it was constrained by lack of holding company structure licence to deploy as many resources as it would have desired to compete in the market.

It is also possible the bank may have been distracted by the too many services it needed to keep running. It operates GTPay, a payments gateway similar to Paystack; GTCollections, a payments aggregator; QuickCredit, a digital lending platform; and Habari, an e-commerce super-app.

Habari 2.0

Habari Pay offers GTBank an opportunity to get back on track to compete in the payment market.

“Nigerian banks need to be retooled and reinvented, and fast,” Aloy Chife, managing partner and CEO SAANA Capital, a venture capital and high-impact firm, said.

“The era of monopoly trusts mollycoddled by the regulator may be fast approaching its expiration date (Nigeria is broke and there’s only so much paper the regulator can print after all),” Chife said.

He highlighted two lessons from the US regulator the Office of the Comptroller of Currency (OCC), first in 2019 when it opened up the core business of banking – receiving deposits, paying checks, lending money – to fintech. This move meant that any fintech firm was free to venture into any of the banking areas. Secondly, in 2020, the OCC authorised banks to open custodial services for crypto assets.

The CBN is expected to give final approval for the Holdco structure by the second quarter of 2021 enabling GTBank to deploy Habari Pay. GTBank is promising to prioritise agility with Habari Pay: “We fail fast, we invest faster, and we drive value for customers.”… WorldPay.

Chife said the deployment of Habari Pay may signal a new era of a recalibration by banks that want to become technology companies.

“A bank that wants to become a financial technology company must completely reinvent itself,” Chife said.

In the past, banks have prided themselves on being among the first financial institutions in Africa to deploy digital banking services to customers. They often point to Kenya where the banks delayed taking the initiative only to see their lunch taken away by a telecom operator in Safaricom.

However, while many of them invested heavily in digital technology, less priority was given to improving customer service. Many banks got overwhelmed deploying too many services than they were able to handle.

However, Habari Pay gives GTBank the opportunity to house all its digital banking services on one platform and deploy commensurate human resources to manage them efficiently. It also allows the bank to truly inculcate the DNA – agility, quick decision-making, innovativeness – of a startup, and truly prioritise the evolving needs of customers.


GTB Flutterwave

GTBank to challenge Flutterwave, Paystack

On Wednesday, as the fintech ecosystem in Nigeria was busy celebrating Flutterwave $170 million Series C funding raise, GTBank was out hunting for fintech talents.

READ ALSO: Flutterwave Closes USD $170m Funding

The bank is shopping for talents for its soon-to-be payment company, Habari Pay. In a vacancy advert BusinessDay found on LinkedIn, GTBank described HabariPay as a young start-up on the path to building a truly pan-African payments unicorn.

“We know we can do it – with a high-impact founding team and the backing from a multinational financial services company,” the bank noted.

Interestingly, Flutterwave’s $170 million raise shoot up its valuation above $1 billion making it the second unicorn fintech company in Africa after Interswitch.

Paystack is also among the startups in the eye-sight of GTBank. The payment gateway was acquired in 2020 by global payment company Stripe in a deal valued at $200 million.

GTBank, Sterling Bank, and Access Bank have all applied for a holding company structure licence and they are expected to take-off at least by the second quarter of 2021.

When approved, the three banks will be joining the likes of UBA, First Bank, and Stanbic IBTC which already operate holding company structures. The difference will be in the individual objectives of the institutions.

Segun Agbaje, CEO of GTBank has never made a secret of the bank’s ambitions for the payment services in Nigeria. Hence, the licence is expected to unlock the tap for big investments in payment services.

For Agbaje there is no limit to how far GTBank is willing to go to secure a prime share of the payment market in Nigeria and Africa. This is likely to include acquiring the top-of-the-class technology equipment to ensure that HabariPay hits the ground running from day 1.

“You will have access to best-in-class engineering tools and resources to enable you to solve truly complex problems and develop game-changing payments solutions for the African market. We prioritise agility, we fail fast, we invest faster and we drive value for customers,” GTBank noted in the vacancy position for Product Owner.

Some experts however say the bank’s ambitions and willingness to deploy enormous resources may not necessarily see it through to unicorn status nor controlling the major share in the payment market in Africa.

One major barrier is Agbaje saying Habari will go it alone which could test GTBank’s ability to deploy quickly and meet high customer expectations doing so. Traditional banks do not have the best record for moving quickly and getting things done as fast customers demand them.

GTBank does not have an impressive record in managing customer expectations. Its bank branches across the country still overflow with customers who often leave with different experiences. But the bank has had a long experience in growing electronic payments.




Nestle, Dangote Sugar, GTBank deliver superior ROE in 10 years – Coronation Asset

Over the past 10 years, Nestle Nigeria plc, Dangote Sugar Nigeria plc, and Guaranty Trust Bank have generated more profit from their shareholders investments than peers as evidenced in the consistent and superior return on equity, according to a recent report by Coronation Asset Management, titled ‘Navigating the Capital Market: the Investor’s Dilemma’.

The report studies the impact of the macroeconomic environment on earnings and valuations of Nigerian Stock Exchange (NSE) listed companies, and also beams its searchlight on investment returns, short-term government securities and inflations.

The return on equity (ROE) indicates how effective management is at using equity financing to fund operations and grow the company.

Over the past decade, companies have been operating in an unpredictable macroeconomic environment characterised by currency devaluation, deteriorating infrastructure, inflationary pressure, and volatility in oil price.

Some sectors have not recovered from the sharp drop in crude oil price of mid-2014 that stoked severe dollar scarcity and consequently tipped the country in its first recession in 25 years.

According to Coronation Research, GTBank, the largest lender by market value, had superior and consistent ROE in the last 10 years, which means it is a worthwhile investment.

The lender’s returns have been consistently higher in the benchmark Fair Value Equity Return (FVER), a parameter the investment house uses to gauge the efficient and profitability of an entity.

The analysis of the 2019 financial statement of top tier banks shows GTBank recorded ROE of 28.64 percent, which compares to Zenith Bank (24.80%); Access Bank (15.98%), and United Bank for Africa (14.90%).

Coronation Research, however, says the good news is that the trend (FVER) has been moving upwards.

For instance, Zenith Bank has joined GTBank as a strong performer (i.e. its RoE exceeds the FVER) over the past three years, while Access Bank joined this fortunate group last year.

The report observes that among the pure-play food manufacturing companies there is the remarkable exception of Nestle Nigeria, which has recorded an average RoE of 74 percent over the past 10 years.

Analysts at Coronation Research attribute the success of the consumer goods giant to its product portfolio that has won consistent loyalty from Nigerian consumers; its operating margins have been high and consistent, thanks to a high degree of local sourcing; it pays almost all its Net Profits as dividends, keeping its equity level low.

The analysts say majority of Nigerian listed companies do not return what they consider an adequate – 20.53 percetn – RoE; but they add that there are notable exceptions and several bank stocks deliver returns above this level, while other bank stocks are trending towards this level.

The report notes that many industrial companies have reported steeply declining returns over the past 10 years, disappointing a generation of investors in Nigerian industry.

Interestingly, the listed brewers are hardest hit from the economic downturn as ROEs of two out of the three dominant players in the industry have been declining in the last 10 years.

Aside macroeconomic uncertainties, the brewery industry was reeling from stiff competition; this happened when International Breweries launched top brands into the market in 2013. Peer rivals found it practically difficult to grow revenue.

The Fast Goods Consumer Goods Companies (FMCGs) have seen operating margins deteriorate due to hike in utilities and spiralling inflation that erodes the purchasing power of consumers. Because they had hiked the price of product in 2017 to compensate for rising production cost caused by dollar scarcity, it would be practically difficult for them to pass rising cost to beleaguered consumers in form of higher price.

The coronavirus pandemic that ravaged economies across the globe and disrupted the demand and supply side of the market, as government imposed lockdown policies, has dealt a great blow to the industry.

The earnings seasons have kicked off, showing play food companies that have released half-year results falling off the cliff.

Coronation Research notes that many companies with high shareholder returns have failed to deliver stock price returns of the same order.

“This is because the market has been de-rating these stocks, over time paying lower and lower multiples for their earnings. We cite several bank stocks as examples,” notes the report.

To shareholders who have invested in an entity with cash that would have been deployed in other investments, profit is the only thing to them.

Investors’ apathy towards the Nigerian equity market has heightened as they have been dumping shares due to lack of policy direction on the part of President Muhammadu Buhari-led government and poor macroeconomic indices.

The crash in oil price due to the coronavirus pandemic and rift between Saudi Arabia and Russia have elicited stock market rout as sentiments towards the equity market weakened to a record low.

In all, the All Share Index closed H1-2020 (July 24) at 24,474.62pts, with YTD loss pegged at 8.18 percent.

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