Not the biggest but the most profitable. That’s the strategy of Guaranty Trust Bank (GTBank) and it’s one that – with a return on average equity of 28.5% in 2020 – it is clearly achieving among its banking competitors in its home country Nigeria and also across Africa.
This is not to say that GTBank’s leadership is unchallenged. Through acquisitions Access Bank has become not just the biggest Nigerian bank by assets but also Africa’s biggest bank by customer numbers, and one with an enviable digital franchise. Synergies from Access Bank’s 2019 acquisition of Diamond Bank could yet displace GTBank’s dominance of investor attention outside South Africa.
Unlike Access, under chief executive Segun Agbaje, GTBank stepped back from the Diamond Bank acquisition and from the opportunities surrounding the restructuring of Bob Diamond’s former pan-African banking venture, Atlas Mara.
Agbaje is following what he hopes is a more efficient and focused approach, which he thinks will also bring scale. Indeed, GTBank is not just unusually profitable in terms of its return on equity but also its cost-to-income ratio, which stood at 38% in 2020. “In the next five years we will get to 50 million [customers], and we can get there without doing an acquisition,” he tells Euromoney.
GTBank is taking alternative and, in some respects, equally radical steps to restructure its business. Late last year, it gained regulatory approval in principle to move to a holding company structure that will house the bank – split between Nigeria, the rest of west Africa, east Africa and the UK – as well as a payments company, asset manager and pension fund administrator.
Ultimately, Agbaje wants Nigerian banking to account for about half of the business, with non-banking income at around a third.
Even outside pure banking, however, the bank’s network and client base will remain a key competitive advantage. Agbaje believes the transition will help provide a more holistic service to GTBank’s clients, while also helping the banking divisions focus on their core businesses and core geographies. The asset management focus further solves the problem of clients pulling money due to low deposit rates. “When we lose money, we can lose those funds to ourselves,” he says.
Especially in payments, it’s about preventing fintech and telecom companies taking business that he feels should rightly be with GTBank. “We can continue being like every other bank or we can create structures to diversify our income and compete more efficiently,” explains Agbaje, who will switch from chief executive of the bank to that of the holdco.