GT HoldCo’s birth on NGX, LSE draws positive analysts’ call

ASAM analysts see positive revenue improvement HoldCo includes banking, asset management, PFA, GTPay, for flexibility to adapt to future opportunities

GUARANTY TRUST HOLD ING COMPANY has now begun active trading on Nigeria and London stock exchanges following a process leading to the tier-1 financial institution restructuring into a financial holding company.

On June 24, 2021, the entire 29,431,179,224 issued shares of GTBank were delisted from the daily official list of the Nigerian Exchange Limited (NGX) while the firm’s entire issued share capital of 29,431,179,224 ordinary shares of 50 Kobo each was also listed the same day on the daily official list of the NGX and billed to trade at N28.55 per share.

Leading up to the listing, less than a week earlier, trading on the shares had been suspended on both the Nigerian Exchange Group and the London Stock Exchange to allow the tier-1 lender to officially transmute into its new form, a holding company, now to be known as Guaranty Trust Holding Company Plc, on the Nigerian Exchange and London Stock exchange concurrently as a private limited liability company under the relevant provisions of Nigeria’s corporate legislation.

On the back of this development, analysts at Arthur Stevens Asset Management (ASAM) Limited, were quick off the block in making a call about what lies ahead of one of the most respected financial institutions on the African continent. Specifically, they stated that the plan by the banking institution to restructure into a financial holding company will drive increased revenue from the payment business with an overall improvement in the revenue of the Holdco as against revenue flow from the previous structure.

“Given GTBank likes to run a low-cost model, we believe they would look at a more centralized, shared service approach in terms of the model. We also expect costs associated with the restructuring process to increase Opex though management stated that these will be minimal. Such costs include one-off costs such as legal and regulatory fees, professional advisory fees, acquisition costs and some fixed costs. There would also be some ongoing costs associated with running the Holdco.

“We expect increased revenue from the payment business and also expect new revenue sources from the asset management and PFA business, hence we expect an overall improvement in the revenue of the Holdco as against revenue flow from the previous structure,” they said.

Stretching the analysts’ view, Nigeria banks are diversifying away from commercial banking into holding company structure given the challenging macro and regulatory environment. Apart from GTBank, banks such as Sterling Bank and Access Bank have sought and have been granted regulatory approval to diversify into a Holdco structure. Until recently, Stanbic IBTC, FBN Holdings, and FCMB Group were the only financial institutions operating the Holdco structure.

“In our view, the bank is well-positioned to create value for shareholders from the new businesses given its strong brand appeal, and track record of delivering innovative banking solutions.

“We also expect the bank to leverage its deposit base to create additional opportunities for its customers who are also interested in other investment products. By so doing, the customers’ deposit should largely remain within the ecosystem. Furthermore, the bank may also try to lobby its salary account customer base to switch to GTB to grow in the Pension segment. In the fintech segment, we expect the bank to leverage on its PanAfrican customers’ base to drive value as the Nigerian market seems to be competitive due to the emergence of new fintech players. The bank intends to list the fintech as a standalone business similar to what the telcos are planning, which we think also puts them in a position to compete in the market and drive scale. We will provide more clarity when we have further information from management,” ASAM analysts concluded.

Background to the Development

Trading in the shares of Guaranty Trust Bank plc. was suspended for trading on Friday 18th June 2021 in preparation for the delisting of the bank and subsequent listing of the new Holding company (Holdco). Guaranty Trust Holding company structure would consist of the banking and the nonbanking subsidiaries. The suspension also meant that trading licence holders and the investing public did not have access to the shares of the banking institution until the process of the restructuring by the top Nigerian lender was completed, in what includes the official listing of the holding company structure of the bank.

As of June 24, 2021, the entire 29,431,179,224 issued shares of GTBank were delisted from the Daily Official List of the Nigerian Exchange Limited (NGX) while GT Holdco’s entire issued share capital of 29,431,179,224 ordinary shares of 50 Kobo each were also today, 24 June 2021 listed on the Daily Official List of NGX at N28.55 per share. The delisting of GTB and listing of GT HoldCo on NGX were pursuant to the Scheme of Arrangement between Guaranty Trust Bank Plc and the holders of its fully paid ordinary shares of 50 Kobo each as approved by the Securities and Exchange Commission and sanctioned by the Court.

The HoldCo. Structure and Proposed Subsidiaries

According to the bank’s management, the banking subsidiaries will include Guaranty Trust Bank in strategic locations such as Nigeria, West Africa, East Africa and the United Kingdom while its non-banking arms will see the birth of an asset management company, a pension business and a payment services company.

The non-banking subsidiaries will ensure that the asset management firm acquires other businesses. The management also disclosed that the pension fund administration segment will acquire small existing businesses that will be grown organically, while the bank will leverage on its existing and vibrant fintech business, to be called GTPay, a secure internet payment gateway developed to facilitate payments online using debit cards issued by banks on the Interswitch Network.

It also plans to acquire merchants for its fintech arm as the management also noted that the payment business will work with the bank to develop a mobile wallet strategy which will be taken to three other African countries, probably Ghana, Cote d’Ivoire, and Kenya to drive scale.

As earlier stated, the leading lender is currently adjusting its model and service offerings in a stead relevant in the financial services sector resulting from the growing evolution of the businesses globally as it will position the banking institution for sustainable long term growth.

The plan which is expected to be finalised by the second half of 2021 will become operational at completion despite the timeline setback it suffered due to the COVID-19 pandemic, the new structure will see positive moves toward profitability considering the recent suspension of the trading of its shares.

GTBank Board Vs GT HoldCo Board

According to Guaranty Trust Bank, “The current board of the bank will be dissolved, and new boards reconstituted for both the Holdco and the bank. Under the terms of the scheme and subject to the conditions, the scheme shareholders will receive the same number of Holdco shares in exchange for their current GTBank Shares. On the effective date, each shareholder of GTBank will receive one share of the Holdco shares for every GTBank shares held within five business days of the effective date. The existing GDRs will be delisted from the LSE and cancelled. Each holder of the existing GDRs in the bank will receive for each existing GDR held, one Holdco GDR within 10 business days of the effective date.”