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AfricaNovember 1 2017

GTBank chief seeks to lead Nigeria in SMEs and digital

Guaranty Trust Bank chief executive officer and managing director Segun Agbaje tells James King about its expansion plans, with a focus on digital and SME business, and why he backs more relaxed monetary policy in Nigeria.
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Segun Agbaje

Q: The past few years have not been easy for Nigerian banks. How would you describe the operating environment today?

A: Last year was tougher than 2017 – there were issues with foreign exchange [FX] liquidity as well as a devaluation of the naira among other challenges; 2017 has still been quite difficult although Nigeria's Investors & Exporters [I&E] window has eased FX liquidity shortages. The introduction of this window has been one of the most successful policy developments of the year: there is foreign exchange availability today if you are willing to buy and sell at the Nigeria Autonomous Foreign Exchange Market. Nevertheless, a greater convergence between the official and parallel naira rates still needs to occur.

I also think that the current monetary policy is probably too tight. This needs to loosen to allow the economy to grow. These factors, and others, have contributed to a challenging operating environment, but opportunities still remain, particularly in the retail sector. For instance, we started out as a high-end wholesale bank, but in the past five years we have tripled our customer base to more than 10 million.

Q: To what extent is Guaranty Trust Bank [GTBank] seeking to downsize its foreign currency loan book?

A: We are reducing the size of our FX loan book with respect to our term loans to the energy sector. Though oil prices have stabilised, I don’t think we will be increasing our exposure to the upstream oil and gas sector. In terms of our trade dollar book, we plan to cautiously increase this in the last quarter of the year with the I&E window.

Q: How would you characterise GTBank’s approach to digital banking?

A: First, we are an early mover. We don’t tend to follow when it comes to digital banking. I think the major difference for us is in the way we have dimensioned our competition. Most banks are still looking at digital competition in terms of other lenders, but we have broadened our competitive horizon by considering the impact of telecommunication companies and fintechs. In fact, anyone with a mobile wallet is now the competition.

So when we devise our response to the competition, we are thinking beyond banks and designing products able to compete with mobile wallets. We have launched online platforms such as the SME MarketHub, our mobile app GTWorld and USSD banking. We have also set up an in-house fintech operation and we are opening up our application programming interface to create a sandbox that will allow fintechs to connect with us. We want the bank to become a completely digital platform.

Q: What role will small and medium-sized enterprises [SMEs] play in GTBank’s diversification strategy?

A: We expect to see significant growth in our SME business over the next three years. Today, the SME sector accounts for about 12% of our deposit base and close to 2% of our total loans. Our aim is to increase our SME loan book to between 5% and 10% of total loans over the next few years. We believe growth in this sector can be done well if you grow carefully and have a good risk framework in place. I don’t think SMEs have a capacity problem; the major issues facing the sector is being able to track their cashflows and having platforms to do business.

Q: GTBank has an Africa-wide footprint in both Anglophone and Francophone markets. Is the bank planning further growth across the continent?

A: Our international expansion increases the diversification of our business and enables us to leverage our relationship with Nigerian corporates expanding across the continent. At present, our regional operations account for roughly 10% of the bank’s profit. We expect this to increase to about 15% to 20% over the next five to 10 years. We are opening an office in Tanzania in December and will be commencing operations in Mozambique in the first quarter of 2019 to capitalise on the country’s offshore gas boom. By diversifying our business and our revenue streams in this way, I’m hoping that our risk rating will surpass the sovereign’s.

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Read more about:  Africa , Nigeria