Tier-1 lender, Guaranty Trust Bank (GTB), says it is committed to meeting the 60 percent Loan-to-Deposit Ratio (LDR) target as recently directed by the Central Bank of Nigeria (CBN).
The bank’s LDR is currently at 57 percent and it is on track to growing its loan book by about N40 billion-N50 billion to meet CBN’s new LDR target by the September 30, 2019 deadline, Segun Agbaje, chief executive officer, GTBank, said on an investors’ conference call.
Jerry Nnebue, Banking Analyst, CardinalStone said an application of the 1.5x multiple on target sectors in the computation process could even drive the bank’s LDR above the new regulatory limit.
According to the bank, it is ramping up efforts to grow its digital loan book, with related exposures now at c.N25.0 billion and Non-Performing Loan ratio at 0.07 percent.
“Targeted sectors for loan growth are manufacturing, retail, consumer lending, and telecommunications,” he said.
On the mid-to-long-term growth prospects, Agbaje noted that the bank was open to exploring inorganic growth avenues that may also include potential acquisitions outside of Nigeria.
“In East Africa, we have to do one of two things; we either have to bring in capital or we have to think of acquisitions,” he said.
GTB already has operations in Kenya, Uganda, Tanzania, and Rwanda, and will also consider ways of expanding existing businesses.
Commenting on the bank’s loan exposure to the oil industry, Agbaje noted that it was more concerned about its downstream exposures than it was on its upstream and midstream exposures.
“Specifically, downstream exposures now account for 9 percent and 59.0 percent of total oil and gas exposures and NPLs, respectively,” he said.
Speaking on its non-interest income, the bank disclosed that it was yet to really scratch the surface on lines such as transaction-related fees as it plans to boost its fee income to make up for lost revaluation gains.
“In addition, the bank sees recoveries as a key part of its strategy for boosting non-interest income at least until FY’20. These recoveries relate to the initial IFRS 9 write-offs, part of which the bank expects to write back,” Agbaje said.
The management noted that impairments spiked in the second quarter because the bank took prudent measures on exposures that appear to be non-performing.
“It is likely that the bank will pursue recoveries on these exposures” Nnebue opined.
On regulatory concerns, GTB said it expects the CBN to use more moral persuasion than fiat to drive lending as it does not anticipate a ban on banks’ investments in treasury securities or other measures that will destabilise the banking system.
“Overall, management does not see the policies of the CBN as negative for the revenue-generating capacity of the bank as the bank is about $1 billion long on its balance sheet and currently has no swaps,” he said.
GTBank expects the licensing of Payment Service Banks to increase competition in the retail space. It, however, believes that its brand, strong retail base, and digital offerings will support its market position.
OLUFIKAYO OWOEYE & OLUWASEGUN OLAKOYENIKAN