The mastery of balancing competing demands in banking remains the driving force behind GTCO’ s superior performance
The management of every bank is deeply intertwined with the management of risk, as it seeks to balance the needs and expectations of five key constituencies: surplus units (depositors), deficit units (borrowers), shareholders, regulatory authorities, and the community at large. Given the diverse demands of these groups, banks face a complex challenge in meeting their expectations.
Each of these constituencies has distinct demands that often conflict with one another. For instance, depositors require maximum liquidity and competitive interest rates, while borrowers seek affordable credit with flexible repayment terms. Shareholders expect maximum returns on their investments, while regulatory authorities prioritize risk management and compliance. The community, meanwhile, expects the bank to contribute to local development and minimize negative impacts. As a result, banks must navigate these competing demands carefully to ensure they meet the needs of all stakeholders.
Moreover, one of the most significant challenges facing banks is the tradeoff between liquidity and profitability. To meet depositors’ demands for liquidity, banks may need to hold a significant portion of their assets in cash or other liquid instruments, which typically offer lower returns. However, to generate profits for shareholders, banks need to invest in higher-yielding assets, such as loans and advances, which are often less liquid. This tradeoff highlights the delicate balance banks must maintain between meeting short-term obligations and generating long-term value.
In addition to managing liquidity and profitability, lending is a critical function of banks that requires a deep understanding of risk management and credit analysis. Banks that are skilled at lending can generate significant profits while also contributing to the development of the community. However, lending to certain sectors, such as agriculture or housing, may be considered unprofitable due to the long-term and illiquid nature of these investments. Therefore, banks must carefully assess the risks and opportunities associated with different types of lending.
Ultimately, to succeed, banks must balance the competing demands of their various constituencies. This requires careful consideration of factors such as liquidity, profitability, risk management, and regulatory compliance. By striking the right balance, banks can deliver value to their shareholders while also contributing to the well-being of the community and maintaining the trust of their depositors and borrowers.
One bank that has mastered the art of navigating through these demands and challenges and gained the power to deliver superior returns is undoubtedly GTCO.
GTCO, or Guaranty Trust Holding Company, has demonstrated exceptional leadership in the banking industry, driven by its commitment to strategic risk management, lendin g expertise, and stakeholder value. Under the guidance of its Group CEO, Segun Agbaje, GTCO has solidified its position as a market leader .
Through its strategic vision, robust risk management practices, and commitment to delivering value to its stakeholders, GTCO has established itself as a leader in the banking industry. Its ability to balance competing demands and capitalize on opportunities has enabled it to generate significant returns for its shareholders while also contributing to the development of the communities it serves.
Its 2024 financial performance confirmed the above claims, with a record-breaking profit before tax of N1.266 trillion, a 107.8% increase from the previous year. This outstanding performance underscores GTCO’s resilience, depth, and strong earnings quality, driven by a well-diversified revenue base and robust risk management framework
Its unaudited financial results for the first quarter of 2025, showcases a strong performance despite a decline in profit before tax. The company’s profit before tax stood at N300.4 billion, a 41% year-on-year decline due to the non-recurrence of N331.6 billion fair value gains recognized in Q1 2024. However, GTCO’s core earnings lines tell a different story, with net interest income jumping 40% year-on-year to N318.4 billion, driven by increased loans to customers and deposits from customers.
GTCO’s net interest income reached N318.4 billion, up 40% year-on-year, driven by a 15.6% growth in net loan book to N3.22 trillion and a 7.7% increase in deposit liabilities to N11.20 trillion. Profit after tax was N258.03 billion, a 43.54% decrease year-on-year, due to the decline in fair value gains. The company’s asset quality has improved, with IFRS 9 Stage 3 Loans at 3.3% at bank level and 4.5% at group level, indicating a robust risk management framework. The Capital Adequacy Ratio (CAR) stood at 34.6%, demonstrating a strong capital position.
GTCO’s diversified revenue base and healthy balance sheet have enabled the company to record solid growth across most income lines. The company’s core earnings have been driven by efficient cost management, with net interest income after accounting for loan impairment charges showing significant growth. GTCO’s robust risk management framework has enabled the company to maintain a strong asset quality and reduce loan impairment charges.
GTCO’s management remains optimistic about the year ahead, with the company well-positioned to deliver a strong performance. The company is executing with discipline across its strategic priorities, including branch expansion, information technology upgrades, and growth of its loan and investment securities portfolio. The recent capital injection into its banking subsidiary, Guaranty Trust Bank Limited, will support the bank’s growth initiatives and compliance with regulatory requirements.
