Guaranty Trust Bank (GTBank) has long established itself as a top-tier bank in its native Nigeria, having dominated the market through strong corporate banking. With a solid footing in West and East Africa already, the firm is keen to expand into countries with high growth potential, such as Angola and Mozambique.
Surprisingly, the bank is not pursuing equity-generating areas such as wealth management, which has been a popular choice for banks of late. Rather, GTBank is going all-in on retail, pursuing new customers across a plethora of alternative channels, as well as drawing in lucrative SMEs through a brand new platform. All of this could put the bank among the top three banks in Africa by 2016 based on profits, believes Managing Director and CEO Segun Agbaje.
“Right now we’re daring to dream,” Agbaje told World Finance in an exclusive interview. “In 2011, we were number 15 in Africa in terms of profit, today we’re number six, and our objective is to be number three… within the next two years. Once we’ve done that, it will give us some scale to develop across different economies, so we’ll be relevant in West Africa, East Africa and obviously be looking into Central Africa.”
The firm currently has offices and subsidiaries in Nigeria, Ghana, Liberia, Gambia, Cote d’Ivoire, Sierra Leone, Rwanda, Kenya, Uganda and the UK. The Kenyan, Rwandan and Ugandan businesses – the firm’s East African subsidiaries – were all purchased when Guaranty Trust Bank took over Fina Bank in late 2013. The bank currently earns six percent of its total profits abroad, and Agbaje expects to generate one tenth of the group’s profit from outside of Nigeria by 2016.
“We’re trying to build a strongly African franchise and we started in Anglophone West Africa because we believe that ultimately there will be a West African economic zone. We went into Francophone Africa for that same reason. The three East African countries we’re in right now give us a client base of 87 million, and they’ve also discovered oil in a lot of these places. So in order to be a very profitable African institution we’re hoping to go into Mozambique and Angola next for the same reasons – reaching natural resources as well as a population size where we think we can help,” says Agbaje.
Going where the growth is
With this regional expansion in mind, GTBank is not on the cusp of entering Africa’s only developed economy, South Africa. Instead, Agbaje wants to focus on economies with a much higher growth trajectory than the matured South African economy. The hope is that the focus on countries experiencing explosive growth will bring in a surge of customers, as the bank hones in on the lower end of the retail segment through alternative approaches to capturing customers.
“In growing our retail [segment] we’re trying to use all other platforms, which is why we’re using mobile and social banking on Facebook as well as looking into using other social networks. Recently, we’ve also launched a virtual SME market hub, where we put SME-type companies on the platform, creating our own little marketplace for them,” says Agbaje.
GTBank’s social banking service offering on Facebook includes balance enquiries, mobile » airtime purchases, third-party money transfers and access to 24/7 real-time customer service. The service was introduced in 2013 as part of several new value-adding channels designed to give customers a high degree of flexibility and allow people to bank safely, quickly and conveniently at all hours of the day.
The bank currently has over two million followers on Facebook: the largest for any African bank. It also offers a mobile money transfer application similar to Vodafone’s popular M-Pesa service, which allows customers and non-GTBank customers to perform transfers and payments from their mobile phones to any mobile phone subscriber within the country, in addition to online banking.
“We’re not planning on making major business acquisitions, so one way for us to grow our retail base is through mobile phones. Five years ago we had a retail base of about 300,000. Today it’s 5.4 million and we’d like to get to about 10 million in the next two years,” says Agbaje. “In Nigeria, you have more than 100 million mobile subscribers today and even with people having two or three mobile phones, we’re still looking at 70-80 million potential customers so there really is a huge upside.”
Another alternative customer channel is GTBank’s ‘Express’ service: an agent banking offering that provides customers with access to financial services at convenient locations such as supermarkets, schools, cinemas, markets and restaurants. It is an initiative to reach out to the unbanked segments of the population through the use of non-banking retail outlets.
“Financial inclusion has many facets to it – it’s not just for the poor and downtrodden,” says Agbaje. “When we’re talking about a number like 10 million, you’d have to drive this type of financial inclusion by banking in non-traditional banking outlets. We piloted it with a supermarket and right now we’re in a joint partnership with a petrol station. After that we’ll be working with fast food restaurants.”
Profit before tax
Catering to SMEs
To this end, GTBank has made it a key point to embrace digital technology in its search for strong business growth. The firm’s most recent venture is its SME MarketHub, which offers the resources entrepreneurs need to grow their businesses, in addition to enabling online trade and market visibility.
Customers on the MarketHub get a unique website address, a personalised online storefront, a shopping cart with no consignment fees, an online payment gateway, inventory management tools, messaging services and membership in the hub’s directory. More importantly, the hub provides access to millions of customers – as long as the SME is a new or current GT Bank customer.
The aim is to help customers promote their business online to a broad audience, buy and sell a wide range of products online and find potential business partners, suppliers etc. through the global directory. Agbaje believes this venture is set to be the key driver of profit growth in the coming years – despite the known volatility associated with SMEs. “No matter the economy, SMEs constitute the largest part of the business population,” he says. “From a banking perspective it is also one of the riskiest places to put loans. With an equity focus, we’re trying to work backwards for them. Creating a business platform, generating cash flows, growing their businesses so they will have a better chance of acquiring the services and loans that we will ultimately give them. So we’re not going to start by agreeing to loans – we’re going to help them create businesses, give them capacity in the form of accounting, corporate governance etc., and then we’ll later help grant them loans.
By building a robust technology infrastructure to drive its mobile and electronic banking channels, GTBank could be looking at enormous growth prospects in the retail space. What’s more, following the announcement of its 2013 annual results, the firm is looking to grow its loan book by 15 to 20 percent. SMEs currently account for 10 percent of the loan portfolio.
GTBank’s audited annual results revealed that its loan book amounted to $6.3bn at the end of 2013, up 25.48 percent from $5bn the previous year. The bank’s profit before tax rose 3.9 percent to $671m in 2013, while return on average equity was up 29.3 percent. Agbaje attributes the positive results to the many technological and retail initiatives implemented by the bank in recent years.
“If you want to stay profitable, continue to grow and support efficiency then you have to develop new markets,” says Agbaje. “You can’t continue to grow only the corporate end of the business or the high end of retail, because if you do, you’ll get to a point where you can’t grow anymore. So in order to sustain growth you have to open new markets – whether it’s retail or SME.”
To this end, the CEO maintains that GTBank will continue to strengthen its core business areas such as oil and gas, maritime, manufacturing and corporate business. By not giving up market share in traditionally strong areas and moving into new regions, the firm is looking to gradually extract more profit.
Keeping costs down
However, as most people know, plans for expansion across regions and offerings tend to come with additional costs. With an aim to achieve a 40 percent cost-to-income ratio by 2016, the bank is hard-pressed to make its growth strategy as efficient as possible. According to Agbaje, this involves ensuring economies of scale across suppliers, hiring at entry-level to keep staffing expenses down, as well as focusing less on a sizeable branch network and more on alternative, cheaper delivery channels such as online and mobile banking. “It’s all about being aware that everything you do is relevant to capital expenditure. Whether it’s people or bricks-and-mortar, always go for the cheaper, more efficient options,” he says.
With a brand hinged on professionalism, ethics, integrity, and the concept that the ‘customer is king’, it is worth asking whether efficiency to that level is compatible with the bank’s high standards of customer service.
“You have to segment your business properly so nobody suffers,” says Agbaje. “For instance, in retail you have human beings servicing your high-net-worth and personal banking clients, while your mass retail clients will be serviced through other channels that are less expensive – like the contact centre we’re about to complete in Nigeria with about 1,000 call-centre agents. Straight-through processing like mobile and online banking and our ATM network ensures that we are able to keep our service standards up as we expand.”
Choosing a customer-friendly outlook was never a hard choice for GTBank, which took advantage of a gap in the market when launching in Nigeria 23 years ago. “When we came into the banking industry, all the colonial banks were not known for service, so there was a good niche for us to pick in order to attract customers,” says Agbaje.
Guaranty trust bank profit after tax
This is also why corporate social responsibility (CSR) is a major focus for the bank, which, as opposed to its competitors, is not focusing its marketing or philanthropic efforts on attracting a wealthy or mature clientele. Rather, GTBank has made the young African population its main focus – a group that is large and generally underbanked. The bank’s CSR strategy includes adopting non-fee-paying schools by helping to teach, run labs, refurbish and improve facilities. Other key areas include sponsoring sports, arts and music initiatives for young people, in addition to a programme for children with autism.
“Banking is a service-driven business and all the money we make comes from our customers. CSR should be important to any corporate organisation – even for selfish reasons, because if you take care of people in an economy where you are trying to grow, a natural love comes with it,” says Agbaje.
Whether it’s GTBank’s dedication to its customers or the alternative approaches to retail growth that it supports, one thing is for sure: it has been the most profitable bank in Nigeria consecutively for the last three years, and 2014 could prove just as positive.