Financial Services
Shareholders approve GTBank’s planned HoldCo structure
Shareholders of GTBank Plc have approved the holding company structure for the bank.
The shareholders of GTBank Plc have approved the holding company structure for the bank, as they expressed excitement over the benefits they would derive from the new structure.
At the court-ordered meeting held on Friday, which was attended by Nairametrics, the investors gave their approval to the company for the transfer of the 29,431,179,224 ordinary shares of 50 kobo each in the issued and paid-up share capital of the bank held by them to Guaranty Trust Holding Company Plc.
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This was done in exchange for the allotment of 29,431,179,224 ordinary shares of 50 kobo each to the shareholders in the same proportion to their shareholding in the bank, credited as fully paid without any further act or deed.
Expressing his members’ reactions to the planned restructuring, the founder, Independent Shareholders Association of Nigeria (ISAN), Sir Sunny Nwosu, explained that the shareholders were excited because the arrangement that the bank put in place was devoid of complexities usually known as share reconstruction.
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According to him, the bank performed well under the leadership of the Chairperson and the Managing Director; he thus projected that the HoldCo would perform better if the duo were still in charge of the new brand.
He said, “We are excited about the development because we are going to get value as everything we have would be transferred to the holding company. There will be no manipulation as a result of reconstruction that usually leads to fractional shares.”
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Also commending the bank’s leadership and ingenuity, the President, Progressive Shareholders Association of Nigeria, Mr. Boniface Okezie, noted that:
“GTBank has over the years proven to be a force and leading initiator of revolutionary advancement and technology based development in the nation’s banking industry, and we look forward to the growth and advancement it is sure to bring into the new business areas it will be taking on with the Holdco structure.
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“The arrangement where all existing shares of the bank would be transferred entirely to the Holdco in the name of the beneficial owners is good, while the same number of units and percentage would be held in the new entity, is commendable,” he added.
Speaking at the court-ordered meeting on Friday, Managing Director/CEO, GTBank Plc, Mr. Segun Agbaje, explained that in line with the Central Bank of Nigeria (CBN)’s regulations, which require the separation of commercial banking business from other financial services businesses, the bank was adopting a HoldCo structure.
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He said, “I am delighted over the approval by shareholders for the holding company and I assure the investors of a more rewarding future. The bank will not embark on any share reconstruction, as the same number of shares they have with the bank will be maintained.
“Under the new structure, existing shareholders of GTBank would be migrated to Guaranty Trust Holdings via a share-for-share exchange between the shareholders of GTBank and GTHoldings.”
While explaining the benefits of the HoldCo structure, Agbaje explained that the overall strategy was to create an operating model that would profitably grow the bank’s presence in the market for commercial banking and non-banking financial services, in order to achieve the aspiration to be the dominant financial services group.
What you should know the HoldCo structure
- Nairametrics reported when GTBank said it wanted to operate as a financial holding company from 2021. This will make the bank a subsidiary of the new structure and will lead to the delisting of GTBank from the Nigerian Stock Exchange (NSE) and the listing of GT Holdco on the bourse.
- To make this a reality, the firm has obtained an authorization from a Federal High Court sitting in Lagos. According to GTBank, the order for a Court-Ordered Meeting (COM) was obtained on November 6, 2020.
Explore Data on the Nairametrics Research Website
Financial Services
Amid sell-off, FUGAZ investors lose N34.68 billion in a single trading session
Market capitalization of the top five banks dropped to N2.52 trillion as at close of business on the 4th of March 2021.
Investors in the elite banks in Nigeria- FBNH, UBA, GTB, Access and Zenith have lost a total of N34.68 billion in a single trading session, amid sell-offs.
According to data from the Nigerian Stock Exchange (NSE), the market capitalization of the top five banks dropped to N2.52 trillion as at close of business on the 4th of March 2021, shedding about 1.6% in a single trading session.
The loss is due to downward pressure on the share prices of the elite banks, evident by the sell-off witnessed in the market. A snapshot of how much each bank lost and the impact is succinctly captured below;
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UBA
The United Bank for Africa investors lost a total of N10.26 billion after its market capitalization dropped from N282.15 billion to N271.9 billion as at close of business yesterday.
The drop is due to a sharp decline in its share price which closed at N7.95, shedding about 3.64% in a day.
Investors cashed in on the decline to trade about 26,782,197 units of the Bank’s shares valued at N211, 571,939.35, placing the bank as the fourth most traded stock at the NSE. The volume of shares traded by the bank rose astronomically by 201.9%, when compared to 8.87 million units traded the previous day.
On the other hand, it is pertinent to note that the United Bank for Africa (UBA) is yet to release its audited FY 2020 result.
Access Bank
Access Bank Nigeria Plc lost a total of N8.89 billion after its market capitalization dropped from N286.14 billion to N277.25 billion. The loss is due to a decline in its share price from N8.05 to N7.80, indicating a dip of 3.11%.
Just like UBA, Access Bank investors traded a total of 21,586,491 units valued at N168, 090,266.60, placing it as the fifth most traded stock at the NSE today. In lieu of this, Access Bank stock volume appreciated by 229.1%, from 6.56 million traded yesterday.
Access Bank is yet to release its audited financial statements for FY 2020.
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Zenith Bank
Zenith Bank investors lost a total of N7.85 billion after market capitalization dropped to N794.3 billion today. The marginal drop is due to a slight dip in the firm’s share price, from N25.5 traded yesterday to N25.30 as at close of business, indicating a decline of 0.98%.
Investors reacted to this drop by trading 38,647,711 units of the bank’s shares valued at N983, 251,467.75, placing the firm as the second most traded stock at the NSE market.
The drop in the market value of Zenith shares is in contrast to what was obtained last week, when investors gained a total of N37.7 billion, the highest recorded by the bank since the famous circuit breaker. The gains were sequel to an impressive financial performance by the firm for FY 2020, after it recorded a PAT of N230.6 billion and declared a final dividend of N2.70 per share.
FBNH
FBNH investors lost N1.8 billion after its market capitalization declined to N253.06 billion as at the close of business. The drop was due to a 0.7% decline in its share price from N7.1 traded earlier to N7.05.
In lieu of this, a total of 31,253,644 units of the bank’s shares valued at N983, 251,467.75 were traded, placing the firm’s stock as the third most traded stock at NSE. The total volume traded surged by 88.9%, from a total of 16.54 million traded a day earlier.
FBNH had earlier declared a Profit After Tax figures of N79.71 billion for FY 2020, indicating an increase of 8.2% YoY.
GTB
GTB investors lost a total of N5.89 billion, following a drop in its market capitalization from N932.97 billion to N927.08 billion. The drop was due to a 0.63% decline in share price which closed at N31.50.
It is pertinent to note that GTB is yet to release its audited financial statement for FY 2020.
What you should know
- The Nigerian Stock Exchange ended on a bearish note on Wednesday, March 4, 2021 after the ASI declined by 0.40% to close at 39,364.67 index points.
- On a general note, investors lost a total of N82.35 billion, with FUGAZ accounting for 42.11% of the loss.
Financial Services
Zenith Bank GMD explains why its difficult for SMEs to get loans from banks
Onyeagwu has highlighted the regulatory challenges that SMEs are faced in trying to secure bank lending.
The Group Managing Director of Zenith Bank, Mr. Ebenezer Onyeagwu has discussed the impressive positive returns recorded this year by the bank. He also shared some insights on the relationship between commercial banks in Nigeria and Small/Medium Enterprise business owners.
Onyeagwu gave all these insights while speaking in an interview with Arise TV.
On why Nigerian banks charge high-interest loans, making it difficult for small business owners to get single-digit loans for their business, the Zenith Bank GMD explained that the operational costs and regulatory costs involved in running a bank usually sets the pace for every other thing. He listed examples of operational costs involved in running a single bank branch and how all that adds to the bottom line at the end of the day.
He also highlighted regulatory costs which are not particularly known by people outside the banking sector as one of the costs of doing business banks face. These two factors mainly contribute to the high-interest rates banks charge on loans.
“Our cost profile depicts the operating environment. Within the year we saw an upward review in fuel price, which accounted for the increase in our fuel cost. Again, when you are looking at cost of doing business, you also need to look in total, how businesses are being conducted. If I set up a branch today, I would need to provide my infrastructure, I need to provide power, water and in some cases, we even construct the road to provide access to the branch location. So, as a result of the poor state of infrastructure, you see that businesses would now have to contend with providing these resources to get their operations running. So, if we have more available and cheaper utility services and infrastructure to support businesses, of course, the cost would go down.
Then, looking at cost of doing business in banking, it goes beyond those operational costs. We also have things like regulatory cost. A bank like Zenith, given our size, the burden of regulatory cost on us is heavy. By regulatory cost here, I am referring to the Nigeria Deposit Insurance Corporation premium and the Asset Management Corporation of Nigeria fee. So, because of our size, if you look at the numbers, you will see that these regulatory costs account for a whopping 28 percent of our overhead. So, all of them come together to add to the cost of doing business for us as a banking institution in the country,” Onyeagwu said.
On why it is difficult to get single-digit loans from Nigerian banks, Onyeagwu highlighted 3 key reasons why single-digit loans are very difficult to obtain in Nigeria. He listed the following:
- Fiscal deficit
- Government Borrowing
- Money supply and demand
The Zenith GMD stated that it is nearly impossible to issue an interest rate by fiat. He stated that the interest rate will always be determined by market forces.
He said, “First of all, if you are looking at the interest rate, you have to look at it in terms of the theoretical framework and issues around money supply, demand for money, issues around government borrowing, and the fiscal deficits. So, when you put all that together, you will see that you cannot have a situation where you decree interest rate by fiat. Interest rates would always be set by the dynamics and realities in the market. In this case, if you are looking at the interest rate in Nigeria, you have to index it to the risk-free rate. The one-year risk-free rate in Nigeria is like 10 percent. So, it will be difficult to have a single-digit rate in Nigeria.”
Solutions
Onyeagwu highlighted the various ways the Central Bank of Nigeria has intervened in a bid it provides single-digit loans to entrepreneurs in certain sectors. Sectors like cinema, movie, ICT, and fashion designing have been enjoying single-digit loans courtesy of various CBN initiatives.
He said, “We have intervention funds such as the Creative Industry Financing Initiative, where banks in the country provide long-term single-digit funding for entrepreneurs who are in cinema, movie, ICT, and fashion designing. We also have what is called the Agri-Business/Small and Medium Enterprise Investment Scheme. It is also a pool of funds available for businesses in that space. You can as well access these loans. Apart from these, the CBN also has different intervention schemes such as the Anchor Borrowers Scheme, the Commercial Agricultural Credit Scheme, and others, and all these loans are single-digit and they provide long-term financing. The big problem we have is that when you see an SME approaching you for the loan, the SME may not have a track record; he walks up to you and tells you that he needs a single-digit loan and needs N20 million.
“But I can’t give you N20 million without looking where you are coming from. So, we cannot decree the interest rate by fiat. But the regulators have done good work by providing funding schemes and whoever is eligible would get such single-digit long-term loans once they meet the criteria. So, the funding is there, but the SMEs when they approach the banks don’t often meet the eligibility criteria.”
