Nigeria’s GTCO is the bank that gains most when it lends least

Guaranty Trust Holding Company (GTCO) habours a bank of silent riddles. Nigeria’s most admired bank closed 2025 with N1.23 trillion pre-tax earnings, a near-new cost-to-income ratio of 27.9 per cent, and a capital adequacy ratio of 43.8 per cent. These metrics would make even a Swiss private banker blush. However, the number that tells the real story is far less flattering as the loan-to-deposit ratio of is only 24.3 per cent.

Net loans are a mere 17.6 per cent of GTCO’s total assets, despite the bank sitting atop N12.87 trillion of customer deposits. By some standards, GTCO would better be classified as a liquidity warehouse rather than a lending institution. Deposits grew 23.8 per cent in the 2025 financial yea (FY 2025), while the net loan book climbed by only 12.4 percent to further widen the gap. Meanwhile, its peers are not standing still. Zenith Bank, for instance, operates with a loan-to-deposit ratio of 41 per cent, deploying far more of the savings entrusted to it back into the economy.
The Prudence Face of Conservatism and Earnings Quality

GTCO’s management frames its conservatism as prudence, with some merit. The non-performing loan (NPL) ratio improved to 4.97 per cent from 5.20 per in 2024, and cost of risk fell to 2.16 per cent from 4.94. Thus, the loan book that does exist is, at least, improving in quality. Also, there is some evidence of engagement with productive sectors, with manufacturing accounting for 14.0 per cent of loan exposure, behind upstream oil and gas at 26.3 per cent and natural gas at 14.9 per cent. So real sector participation exists, but is subordinated to extractive industry concentration.

The question of earnings quality is where GTCO’s story grows more complicated, as the lender appears more eager to fund the state. The 2024 record profit of N1.27 trillion was driven in part by N517.5 billion in fair value gains that did not recur in 2025. But Management is swift to reassure investors that core income had filled the gap, with interest income rising 23.2 per cent and fee income growing 25.9 per cent. But much of that interest income derives from government securities and treasury instruments rather than commercial credit. Investment securities grew 33.6 percent to N5.54 trillion while cash and equivalents rose 16.8 per cent to N5.46 trillion. As such GTCO is essentially, a well-capitalised conduit recycling Nigerian savings into government.

Whilst GTCO is fulfilling its earnings mandate, it is arguably straying from its developmental one as its source of income is shifting. Interest income rose 17.5 per cent in Q1, but crucially, income from investment securities now rivals loan interest as the primary driver. For shareholder returns, this is a sustainable model; for economic catalysis, it is only but a model of financial engineering.