The Chief Executive Officer of Guaranty Trust Bank Plc (GTB), Segun Agbaje, has disclosed that the tier-1 bank is currently considering a holding company structure.
AgbajeĀ disclosed thisĀ during the companyās recently-heldĀ earnings call.Ā Responding toĀ questions byĀ LanreĀ Buluro, a Director at Chapel HillĀ Denham,Ā GTBankāsĀ CEO explained that a holding company structure will enable his company to keep up with the latest trends in the NigerianĀ financial services industry.
According to him, Guaranty Trust Bank had decided, about ten years ago, to shed all of its subsidiaries in order to become mainly bank-focused. However, trends in the banking and financial services sector over the last few years have informed the companyās decision to rethink its earlier decision.
For instance, Nigerian banks, which are mainly focused on pure banking, have only been able to grow their profits by 5-7%. GTBank noted that this is not sustainable enough even though those numbers are not bad.
[READ MORE: GTBank declares dividend payment for FY 2019)
He then explained further, noting that there are other lines of businesses, asides pure banking, that are doing very well in the financial services industry. One of them is payment solutions. Already, GTBank offers services along this line of business and was able to grow its profit in this space by 60%. Therefore, a holding company structure will enable GTB to better specialise/consolidate on the gains already recorded in its various business ventures outside of pure banking. He said:
āThere are other lines if businesses that are doing very well. If you look at our financial statement, you will seeĀ that our payment business is growing by about 60%. So, that is an area we like.
āIf you look at what is happening in the PFA space, the volume is growing everyday. And if you look at the banks and look at where a lot of their profits are coming from, you will see that a lot of it is coming from that space.
āAs anĀ organisation,Ā we haveĀ that in the world that we live in todayĀ as opposed to ten years ago, and if you look atĀ the landscape ā what theĀ fintechsĀ are doing, what theĀ telcosĀ are doing, what asset management companiesĀ are doing, what insurance companies are doing in the financial spaceā that as anĀ organisationĀ and with the approval of the board, that it is time to considerĀ a holding company structure.ā
He went on to state that this is obviously a very delicate decision. As such, it will require a whole lot of approvals, including the approvals of regulators and the companyās shareholders.
He alsoĀ disclosed that all things being equal, he might end up taking up a bigger position in the proposed GTB holding company.
Note thatĀ SegunĀ Agbaje’sĀ tenure as the Chief Executive Officer of Guaranty Trust Bank Plc isĀ set to expire sometime around half-year 2020.
In the meantime, some experts have publicly reacted to this development. Igho Alonge, an investment advisor and former fixed income portfolio manager, tweeted the following:
GTB set to adopt a HoldCo structure. Mad! I always wondered why they disposed of their insurance, asset management, and pension business.
It appears the HoldCo structure adopted by Stanbic and others appears very attractive in the long term.
— Igho Alonge š¼ (@Ighodaro1) March 11, 2020
[READ ALSO: GTBank releases 2019 full year audited results)
Simply defined, a holdingĀ company, according toĀ Investopedia,Ā is a parent corporationĀ that owns majority shares in other companiesĀ and can, therefore, control such companies decisions and over their management decisions.
In the Nigerian financial services industry,Ā companies like FBN Holdings Plc,Ā StanbicĀ IBTC Holdings Plc,Ā and FCMBĀ Group Plc are all holding companies with various subsidiaries that they oversee.
You may listen toĀ the whole ofĀ Ā GTBank’sĀ earnings conference call by clicking here.
GTBank’s decision did not make sense 10 years ago. It is interesting they are humble enough to retrace their steps.
THEY STILL MAKE MORE MONEY THAN THE GROUPS LISTED
How can someone invest in nairetrics or other investment schemes.