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Here’s what to know ahead of GTCO public offer

Here’s what to know ahead of GTCO public offer

In response to various macro-economic factors, many Nigerian banks are strategically positioning to shore up their capital through a dilutive or non-dilutive approach. Recently, there is very strong indication that Guaranty Trust Holding Company Plc (GTCO Plc) will soon be in the market to raise N450billion to N525 billion through a public offer.

A public offering is the sale of equity shares to the public in order to raise capital. Though, GTCO is expected to make this announcement anytime from now, but very reliable sources noted the proceeds from this capital raise will supplement the capital needs of GTCO flagship banking subsidiary, Guaranty Trust Bank. Guaranty Trust Holding Company Plc consists of other non-banking businesses including, Payment, Funds Management and Pension Funds Management businesses in its ecosystem.

At the Nigerian Exchange Limited (NGX), GTCO equities capitalisation is in excess of N1.233trillion. GTCO has 29,431,179,224 total share outstanding, each valued at N41.9 at the close of trading on Monday March 11. The stock had reached a 52-week high of N48.8 per share. Out of the total shares outstanding, 4.6153 percent or 1,358,323,537 units are the GTCO GDR underlying shares.

According to the Register of Members as at December 31, 2022, no individual out of the 332,528 shareholders held more than 5percent of the issued share capital of GTCO Plc except for the following: Stanbic Nominees Nigeria Limited (18.98 percent or 5,587,006,871 units), and Zenith Pension Fund Custodian (5.25 percent of 1,546,439,539 units).

Stanbic Nominees Nigeria Limited (Stanbic) and Zenith Pension Fund Custodian (Zenith PFC) held 18.98 and 5.25percent respectively of the Company‘s shares in full year 2022 largely in trading accounts on behalf of various investors. Note that Stanbic and Zenith PFC do not exercise personal voting rights on the said shares.

The Board of Directors of GTCO Plc had at their meeting on January 30 considered and approved the audited financial statement for the year ended December 31, 2023. GTCO is expected to release the results on the floor of the Nigerian Exchange Limited (NGX) after the approval of the CBN has been obtained.

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Last year, Olayemi Cardoso, CBN Governor, said while there has been stability in the banking sector, banks in the country were not adequately capitalised to meet the need of a $1 trillion economy which the present government was aiming to achieve.

“Will Nigerian banks have sufficient capital relative to the finance system’s needs in servicing a $1 trillion economy in the near future? In my opinion, the answer is no, unless we take action,” he said.

“Therefore, we must make tough decisions regarding capital adequacy. As a first step, the Central Bank will be directing banks to increase their capital,” Cardoso said at the 2023 Bankers’ Dinner. The apex bank chief’s statement sent waves through the banking industry, reverberating the events of 2004 when Soludo-led Central Bank in a move called banking consolidation increased bank minimum capital requirement from N2 billion to N25 billion.

Since then, several banks are actively planning to bolster their capital reserves, with some institutions already taking concrete steps to attract potential investors.

The capital raise will facilitate the enhancement of Guaranty Trust Bank’s ability to book large ticket transactions, as the effect of devaluation has impacted single obligor limits for most banks and thus their ability to book and participate in large ticket transactions.

Though GTCO had in the first half (H1) of 2023 noted that in the second half it expects revenue streams from all its business verticals to continue to grow and further the gains in earnings diversification as the Financial Holding Structure continues to gain traction; specifically, the non-banking subsidiaries which it noted will strengthen and contribute 3percent of the Group’s performance.

“We are fully committed to our vision of making end-to-end financial services easily accessible to individuals and businesses across Africa and will continue to identify opportunities for value creation by harnessing synergies within our robust financial services ecosystem. The prospect of greater profitability will enable us to further accelerate efforts towards creating better outcomes for our customers and increasing shareholder value,” Segun Agbaje, Group Chief Executive Officer, GTCO Plc said in the first half of 2023.

In its unaudited consolidated and separate financial statements for the period ended September 30, 2023 GTCO reported profit before tax (PBT) of N433.2billion, representing an increase of 155.2 percent over N169.7billion recorded in the corresponding period ended September 2022.

The Group’s loan book (net) grew by 17.7percent from N1.89trillion recorded as at December 2022 to N2.22trillion in September 2023, while deposit liabilities increased by 37.9percent from N4.61trillion in December 2022 to N6.36trillion in September 2023.

The Group’s balance sheet remained well structured and resilient with total assets and shareholders’ funds closing at N8.6trillion and N1.3trillion, respectively. Full Impact Capital Adequacy Ratio (CAR) remained very strong, closing at 25.1percent, while asset quality was sustained as IFRS 9 Stage 3 Loans improved to 3.8percent in September 2023 from 5.2percent December 2022, however, Cost of Risk (COR) closed at 4.1percent from 0.6percent in December 2022 owing to Management’s conservative stance on provisioning as macros worsened year-on-year (YoY), weighing negatively on the expected credit loss (ECL) variables.

Overall, the Group continues to post one of the best metrics in the Nigerian Financial Services industry in terms of key financial ratios that is; Pre-Tax Return on Equity (ROAE) of 52.4percenr, Pre-Tax Return on Assets (ROAA) of 7.7percent, Full Impact Capital Adequacy Ratio (CAR) of 25.1percent and Cost to Income ratio of 29.7percent.

While speaking on the third-quarter (Q3) results, Agbaje said: “Our 3rd Quarter performance underpins our strategic positioning as a leading Financial Holding Company and reaffirms our strong capabilities to successfully navigate the challenges in our operating environment. Going into the final quarter of the year, we will continue to leverage the strengths within our growing financial services ecosystem to improve our products and service offerings, enhance customer experience, and maximise shareholder value.”