GTBank to reduce loan growth to focus on bond investment

Nigeria’s Guaranty Trust Bank (GT Bank) plans to reduce loan growth this year to focus on the increased profit to be had from maintaining domestic bond investment levels, its chief executive said on Wednesday.

Nigeria’s government aims to fund half of this year’s forecast budget deficit of 2.36 trillion naira ($7.73 billion)through the domestic debt market and has been selling bonds at yields of about 16 percent.

GT Bank’s loan book has been at the mercy of last year’s naira currency devaluation – which drove loan growth to 15.8 percent – and debt restructuring by oil companies hit by low crude prices.

With restructured loans now accounting for 15 percent of its loan book, GT Bank will restrict loan growth to 10 percent this year and maintain its domestic bond portfolio of more than 560 billion naira, CEO Segun Abaje told an analysts’ call.

The bank, which has subsidiaries in East and West Africa, will be looking for bond yields of about 14 percent, he added.

Agbaje said the bank is targeting profit of 168 billion naira this year, mostly from bond investments. It reported 2016 pretax profit of 165 billion naira last week.

GT’s shares were down 0.6 percent at 25.50 naira on Wednesday , having gained 3.2 percent so far this year. The price climbed by 36 percent in 2016, outperforming a 2.2 percent rise for the index of Nigeria’s top 10 banks

Agbaje said that the bank’s 42 billion naira loan exposure to Etisalat Nigeria is being restructured.

A banking source told Reuters last week that the Nigerian affiliate of Abu Dhabi-listed telecoms company Etisalat had given notice to its Nigerian lenders that it would miss a payment on a $1.2 billion loan in February.

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