GTBank recently held an investor conference call, following the release of its FY 2018 results last week.
Managing Director of the bank, Segun Agbaje, touched on a wide variety of issues during the call, such as areas of growth, prospects for overseas subsidiaries and status of its loan to 9Mobile.
Areas of loan growth
MD of the Bank, Segun Agbaje stated the bank would grow its loan book along the oil and gas as well as FMCG lines.
Oil and gas, retail and manufacturing (FMCGs). I think that’s where the loan growth will come from in 2019.
Oil and gas loans would be dollar–based. He had no worries about a possible drop in crude oil prices.
You are at $60 dollar oil price today. Most transactions you will do today, tend to work at $50 per barrel. At $60 something dollar oil, the price of a $50 hedge is not prohibitive. If we went into an oil and gas transaction today, we would make sure we put a $50 hedge around the structure.
Regarding the loan taken by Kunoch (Kunoch is controlled by the Dozie family), Agbaje disclosed that the bank had received some payments. (The loan had Diamond Bank and MTN shares as collateral.)
We got our last loan repayment in January. The next repayment is in April. As long as the loan is performing, we won’t worry about the impact of the merger. The value of the shares we are holding actually went up as a result of the merger. In addition, to those shares we are holding, we also have MTN shares. When I look at the prospects of the loan, it’s probably brighter both from a value perspective and dividend perspective.
The GT Bank MD also gave an update on the loan granted to Etisalat Nigeria (now known as 9Mobile).
We have provided for 9Mobile in its entirety. We have taken 68% provision on 9Mobile. So for us, 9Mobile is something we don’t lose any sleep on anymore. We have taken almost N34 billion in provisions. The money we got is all we put into the recovery. There is an additional N50 billion, which will be shared by the banks. After that, anything we get will go straight into the bottom line. We have been very aggressive in our provision for 9Mobile.
Spike in Gen Commerce
The spike in general commerce NPLs was due to a specific customer.
We have a customer that we took a high provision on, so its down to one customer. One of the places you tend to lose money very quickly, in terms of NPLs, is general commerce. That’s because the devaluation losses tend to affect the customer very quickly. I don’t think there is anything peculiar about that. We are not the only people who have that customer.
On payment service banks
In his view, payment service banks are not a threat.
I think at the end of the day, payment service banks are banks. They will be regulated. They will have to learn how to do business. They will have regulatory costs. They will have liquidity ratios. They will have CRR. This is what we have always asked for. A bit of a level playing ground. For as long as we have a level playing ground, banks have a competitive advantage. I don’t see much of a threat.
Sanef has taken away some of the competitive advantage of the telcos, which was their distribution network. We will have a distribution network which will be even wider spread or match them.
Agbaje also expects an increase in Net Interest Margin this year.
In terms of NIM, I expect to see better NIMs, at least for us this year, for a couple of reasons. There has been a pick up in the fixed income security portfolio. I also think that we are moving a lot of our dollar proceeds to grow. The yield on the FCY balance sheet will grow. So even though we have advised 9, we will see better than 9.2% which we did last year.