At a press briefing in July 2020 , Mr Segun Agbaje, the then Managing Director ,GTB , now the Chief Operating Officer , Guaranty Trust Holding Company ,GTCO, was ,no doubt , highly spirited ;his mission was to announce the restructuring of his bank to a holding company; he did this with all vehemence , beating his chest on the benefits of that transition .Like one of those “visionaries”, who embrace strategy and think about amazing things to do , he assured investors and other stakeholders in attendance of a rewarding future. “I am delighted over the approval by shareholders for the holding company and I assure the investors of a more rewarding future”. Agbaje explained that the overall strategy was to create an operating model that would profitably grow the bank’s presence in the market for commercial banking and non-banking financial services in order to achieve the aspiration to be the dominant financial services group.
The bank stakeholders were ,indeed , convinced .Of course, they had every reason to behave as they did. .Guaranty Trust Bank (GT Bank), a reputable financial institution that once had a consistent tradition of good performance, offered unique services, provided competitive edge and rewarded investors.
But it was a failed promise ; he has failed to fulfill that promise since then . Though GTCO stakeholders need great visionaries like segun Agbaje who promised to change how they see the world or to add values no one could , they also need in him a leader with the capability of the amazing operators who could wind up outperforming competitors ; they need in him a leader that could create big promises to them and helped GTCO to deliver on those promises. He had done that before .
Unfortunately, this time around , it appeared from all indications ,they miscalculated .Segun Agbaje-led management’s capability to wind up outperforming competitors is already waning and the bank is now trapped in a vicious circle. The plain truth is that since that promise was made ,heated controversies, growing negative public perception and the untold story of investors’ misfortunes are raising big concerns for anxious stakeholders and depositors who are now on the edge.
This negative index is impugning on its great runs achieved in the last three decades of its establishment. GT Bank which used to a very good case study of a successful indigenous business organization, particularly in the banking industry where nearly a hundred other financial institution have either closed down or were acquired by others is becoming a shadow of its former self . Though , GTCO as it now called, is still among the few with the fastest growth records in the industry, it is currently under a serious competitive pressure .
In recent times, and unfortunately too, this enviable brand equity is without doubt, on the fast lane to the opposite direction. One issue that is giving its stakeholders sleepless nights is its weakened strategic capability in certain critical segments of the market where it once reigned supreme. And this is consequently impugning on profit engine, value creation and public perception even by those outside the banking sector. This is why many observers had at different times, attempted to second-guess the bank’s policies and outcomes.
Though some heated storms, including a spate of allegations bordering on some frivolous deductions from the accounts of its depositors , the recent controversial take over claim of Stallion Nigeria’s assets after the N13 billion judgment debt and counter claim from Stallion as well as the claim and threat from Innoson Motors, one of its clients , that threatened it would take over the bank following a controversial court case and judgment ,might have impacted negatively on its corporate image, the financial impact might be difficult to be substantiated or measured. However, investigations revealed that its customers are allegedly becoming scared and switching over to their rivals while some selling off their shares to escape the sinking ship .
If GTCO is contending some of the above controversies ,what has, no doubt, put the bank under a serious competitive pressure is its weakening strategic capability that has continued to jeopardize its shareholders’ fortunes under the incumbent Chief Executive Officer of the bank. Before its current travails, its strong strategic capabilities that authored its competitive advantage and gave it the laurel of the Most Efficient Bank certainly have remained weakened, keeping the bank under terrible competitive pressure.
That GTCO is under serious pressure is not by any means controversial. The gap between it and its closest rival, Zenith Bank, is getting wider, at least in terms of profitability. Again, Access Bank, the new industry challenger is on the move to displace GT Bank from that position as number two most profitable bank. More importantly, the bank’s investors are getting disenchanted daily on its uninspiring run and the incurred heavy losses at the stock market.
In a nutshell ,the bank is gradually and relatively becoming less competitive as the negative impacts of the forces at work in the environment, weakened internal capabilities and stakeholders influence continue to impose more threats than opportunities on the bank’s strategic position, thereby making it difficult for its strategic choices to deliver to the expectations.
At the receiving end of the above miserable scenario are the shareholders that continue to suffer untold losses from the market sequel to the plummeting value of its stock; the bank’s stock investors are losing their hard-earned investments in billions as its stock value continue to depreciate dramatically. The bank’s stock in the last five years has lost about 69% of its value, and some of its stakeholders are becoming restless and uncomfortable.
SHAREHOLDERS FIGHT BACK, LEAKING THEIR WOUNDS IN AGONG
For many investors who are the victims of its uninspiring run in the last few years ,GTCO is currently perceived a fortune killer ;these investors are now wriggling in agony from a monumental loss suffered by the bank’s share price, particularly by those who borrowed to invest in the bank stock.
Its shareholders have lost billions of naira to its unfortunate downturn in the last five years. At its peak on January 19, 2018, GTB was trading at N54 per share or a market capitalization of N1.5 trillion.
Those who bought its stock at N54 per share were no doubt deceived by so called 2017 impressive financial numbers. In 2017 , the bank’s profit rose by 29 percent YOY to N170b the highest since 1992 when it came into operation, its EPS expanded by 34% while dividend payout of N2.70,its ROAE rose by 154 bps to 27.8% on account of favourable balance sheet positioning and prudent stance on asset quality . However ,despite these impressive numbers ,analysts were gripped by a fear of sustainability of these numbers, but analysts last communicated FVE of N55.20k which translated to an OVERWEIGHT rating on the stock ruled the minds of the gullible investors. Asset quality has gradually improved with
They failed to acknowledge that its Non-performing loans (NPL)at 7.66% and its huge loan loss provisions were also down 60% y/y relative to FY 2017.as well as its total gross dividend yield of 6.0% as against the then current 1-year T-bill yield is15.02%).
A year later, the bubble burst and its share price nosedived sharply. At the close of trading today, August 14th ,2018 the share price of Guaranty Trust Bank Plc moved down by a tick size of -0.52% to close at N38.60k from N38.80k previous close price
During the Covid-19 bull ride of late 2020, GT Co shares recorded a resurgence after its share price rose to as high as N36 taking its market capitalization to over N1 trillion. Since then, its share price backtracked again, ending the year 2021 with a 20% drop compared to the banking sector all share index which gained 10% during the year.
For this uninspiring scenario, GTB saw its share price fall by a whopping 40.5% in 2021, a free-fall that started soon after it transited to a holding company. It will be recalled that GT Bank’s shares price was trading at N28 per share in the weeks leading to finally transforming to a holding company in July 2021; its share price nosedived ending the year 2021 with a 20% drop compared to the banking sector all share index which gained 10% during the year.
Within a few months after its transformation to a holding company, the owners of GT Bank suffered an N80 billion loss in market valuation and lost its position as the most valuable bank to Zenith Bank. Till today, it has not reclaimed that big laurel.
The slide continued last year with the share price falling to N25.45 by January 12th, 2022. Specifically, GTCO stock had begun January 2022 at N26 per share, but in the last six months, investors have been dumping their stakes to take out their investment as they become pessimistic over the firm’s growth prospect.
In a nutshell, and in expectation that Guaranty Trust’s share would fall in the near-to-mid-term period, investors engaged in a sell off that pushed GTCO into a bear market in H1 2022 , wiping off -21.15% from the share price, which closed June with N20.50kobo, against January opening price of N26.
This miserable scenario led individuals and institutional companies holding GTCO shares to lose about N163.34 billion between January to June 2022, with the lender’s market capitalization dwindling to N601.86 billion, from N765.21 billion. This means an investor that spent N2.6 million to purchase 100,000 shares of GTCO at the cost of N26 per share on January 4, has lost over N500,000 in investment within six months.
In the first and the second quarters of 2022, GTCO was the worst affected in the banking sector. The Nigerian Banking sector started the year positively with the NSE Banking Index rising to 0.79% at the end of Q1 2022. The banking sectors Index was elbowed up by Wema Bank which posted a Q1 YTD return of +279.2% and Ecobank with a YTD return of +37.9% while GT holdings and Unity Bank topped a short losers’ list with YTD returns of -13.8% and -13% respectively. The NSE Banking Index in Q2 declined by -2.8% in Q2 2022, with the Index closing at 397.79 basis points against 409.28 basis points in Q1. On the list of gainers, Wema Bank and Fidelity Bank recorded a YTD return of +343.1% and +34.1% respectively. On the loser’s list again, GTCO and Unity Bank recorded a -21.2%, and -16.7%, respectively.
The loss incurred did not abate even towards the end of the year. It rather worsened 2022. GTCO’s share price gave a negative return of -31.5% as of September 30, 2022 ; its share price slipped to a support price of N17.80k on September 30, 2022
The stock opened the month of October with a share price of N17.8 per share after falling by 10.5% in the month of September. The stock continued its free fall following several headwinds that have affected banks in the last few weeks. Its share price hit the nadir at N16.80 in October 12, 2022 from N27.95 in February, 08 2022.
Consequently, in the last five years, those who bought its share at N54 per share if invested N5m must have lost approximately 69% of that investment or N3,450,000 of the total investment.
The bank strived to mitigate its shareholders misfortunes from the capital gains by the way of its dividend to them. A look at GTCO’s dividend history from 2015 to 2021 shows the bank paid 152k,175k, 240k, 245k, 250k ,270k and 300k per share of 50k respectively. In 2021, its 300k per share translated to dividend yield of 11.65% .Its dividend yield has seen a steady rise as dividend payouts increase annually. From
6.64% in 2017 it rose to 8.02% and 9.66% between 2018 and 2019; it came down 9.23% in 2020 before climbing to 11.65% in 2021. But analysts believed that this is too cold for comfort for certain categories investors particularly those that have lost more than 50% to its depreciating stock value in the last five years.
But its shareholder could not be assuaged by its miserable dividend payouts over the years .
The most painful issue, however, is the sharp contrast between the lifestyles of the executives of the bank and other shareholders, the goose that lays the golden eggs; this seems to be what is making some shareholders angrier. “They are living big buy keeping us in penury as the bank is sinking”, a shareholder declared while narrating his ordeal to The Decisionmaker under the condition of anonymity recently. This may not be farfetched. Mr. Segun Agbaje, the Group Chief Executive Officer of Guaranty Trust Holding Company, GTCO, one of Africa’s leading banking groups with a client base of over 20 million customers and business outlays across ten (10) African Countries and the United Kingdom, is one of the best paid chief executive officers in the Nigerian banking industry. According to a report from Proshare Nigeria, one of the leading financial firms in Nigeria , as at 2021, he earned an annual income of N399.7 billion. This presumptuous package is not limited to him as other executives staff members are equally well paid and this is one the reasons why bankers’ lifestyles sometimes raise eyebrow. They live big, flaunting exotic cars and accommodations. This contrasts sharply with their contemporaries in the real sector.
xxxxGuaranty Trust Holding Company (GTCO) recently got pipped by Zenith Bank as the bank stock with the highest share price. Last December, Zenith Bank also blew past GTCO as the most valuable commercial bank in Nigeria topping N800 billion in market cap while GTCO slid to N745 billion. GTCO used to be valued above a trillion a few years ago.
Since the company transformed into HoldCo it has struggled with a number of fundamental issues. Operating expenses have increased of late while interest margins have plummeted in tandem. The bank is likely to close the year with lower earnings per share compared to the year before
