The Chief Executive Officer of Guaranty Trust Bank Plc (GTB), Segun Agbaje, has disclosed that the tier-1 bank is currently considering a holding company structure.
Agbaje disclosed this during the company’s recently-held earnings call. Responding to questions by Lanre Buluro, a Director at Chapel Hill Denham, GTBank’s CEO explained that a holding company structure will enable his company to keep up with the latest trends in the Nigerian financial services industry.
According to him, Guaranty Trust Bank had decided, about ten years ago, to shed all of its subsidiaries in order to become mainly bank-focused. However, trends in the banking and financial services sector over the latest few years have informed the company’s decision to rethink its earlier decision.
For instance, Nigerian banks, which are mainly focused on pure banking, have only been able to grow their profits by 5-7%. GTBank noted that this is not sustainable enough even though those numbers are not bad.
He then explained further, noting that there are other lines of businesses, asides pure banking, that are doing very well in the financial services industry. One of them is payment solutions. Already, GTBank offers services along this line of business and was able to grow its profit in this space by 60%. Therefore, a holding company structure will enable GTB to better specialise/consolidate on the gains already recorded in its various business ventures outside of pure banking. He said:
“There are other lines if businesses that are doing very well. If you look at our financial statement, you will see that our payment business is growing by about 60%. So, that is an area we like.
“If you look at what is happening in the PFA space, the volume is growing everyday. And if you look at the banks and look at where a lot of their profits are coming from, you will see that a lot of it is coming from that space.
“As an organisation, we have that in the world that we live in today as opposed to ten years ago, and if you look at the landscape — what the fintechs are doing, what the telcos are doing, what asset management companies are doing, what insurance companies are doing in the financial space— that as an organisation and with the approval of the board, that it is time to consider a holding company structure.”
He went on to state that this is obviously a very delicate decision. As such, it will require a whole lot of approvals, including the approvals of regulators and the company’s shareholders.
He also disclosed that all things being equal, he might end up taking up a bigger position in the proposed GTB holding company.
Note that Segun Agbaje’s tenure as the Chief Executive Officer of Guaranty Trust Bank Plc is set to expire sometime around half-year 2020.
In the meantime, some experts have publicly reacted to this development. Igho Alonge, an investment advisor and former fixed income portfolio manager, tweeted the following:
GTB set to adopt a HoldCo structure. Mad! I always wondered why they disposed of their insurance, asset management, and pension business.
It appears the HoldCo structure adopted by Stanbic and others appears very attractive in the long term.
— Igho Alonge 💼 (@Ighodaro1) March 11, 2020
Simply defined, a holding company, according to Investopedia, is a parent corporation that owns majority shares in other companies and can, therefore, control such companies decisions and over their management decisions.
In the Nigerian financial services industry, companies like FBN Holdings Plc, Stanbic IBTC Holdings Plc, and FCMB Group Plc are all holding companies with various subsidiaries that they oversee.