The chief executive officer (CEO) of Guaranty Trust Bank (GTB), Nigeria’s largest listed lender by market capitalisation, Segun Agbaje, expects investors to reward the bank with a much higher valuation once the transformation into a holding company (HoldCo) model is complete.
“The valuation of the HoldCo will outstrip that of the bank as we diversify our earnings and move into complementary financial services such as payments and asset management,” Agbaje told BusinessDay in Lagos on Wednesday.
Guaranty Trust Bank’s shares which have risen some 46 percent in the past year still trade at a price to book ratio of 1.54 times, lagging African peers like First Rand Group of South Africa which trades at 1.93x book value.
The key difference between GTBank and First Rand is that FirstRand Limited is a portfolio of integrated financial services businesses offering a universal set of transactional, lending, investment and insurance products and services in South Africa and beyond, while GTB operates just its banking business.
To be among the top 5 banks by profits in Africa, Agbaje says GTBank must evolve with the needs of the customers.
“We see opportunity in payments, assets management and Pension Fund administration as our customer needs are evolving, and we must position ourselves as a one-ecosystem to provide these services. This will diversify our earnings base and grow value,” Agbaje said.
The bank hopes to enter new growth areas, diversify by adding new income lines and accelerate the growth of its core banking business, while extracting more value from its international banking subsidiaries.
GTB has received an approval in principle to proceed with the HoldCo structure from the regulator the Central Bank of Nigeria (CBN) and hopes to conclude the transformation soon.
A one for one exchange of shares will follow the delisting of GTB Nigeria and listing of GTB HoldCo including its global depository receipts (GDRs) listed in London.
GTB will also push to get a credit risk rating for the HoldCo, according to Agbaje.
The bank will build a payments business from scratch, but may eye acquisitions for some of the other businesses it intends to enter into such as Asset management and Pension Fund Administration, but ultimately would not be willing to overpay for a deal to happen, Agbaje said.
“In the next 5-years we will add significant value to shareholders of GTB,” Agbaje said.