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Segun Agbaje the Chief Executive Officer (CEO) of Guaranty Trust Bank (GTB) does not expect the move by the bank to establish a Holding Company (HoldCo) structure to negatively affect its valuation through a conglomerate discount.
Agbaje instead sees a situation where great value is unleashed for shareholders of the HoldCo over the next 5 years.
“In the next 5-years we will add significant value to shareholders of GTB,” Agbaje said in a press briefing yesterday where MoneyCentral was present.
A conglomerate discount also called a diversification or holding company discount refers to the tendency in which the value of a stock of a conglomerate or diversified group of businesses is less than the sum of its parts.
This means that the conglomerate is selling at a discount relative to its fundamental value. Agbaje said the needs of customers were evolving, hence the need for the bank to evolve its service offerings.
“We see opportunities in payments, Asset Management and Pension Fund Administration as customers continue to demand a single streamlined eco-system to bring together all their financial service’s needs,” Agbaje said.
The bank hopes to enter new growth areas, diversify by adding new income lines and accelerate the growth of its core banking business, while extracting more value from its international banking subsidiaries.
GTB has received an approval in principle to proceed with the HoldCo structure from the regulator the Central Bank of Nigeria (CBN) and hopes to conclude the transformation soon.
A one for one exchange of shares will follow the delisting of GTB Nigeria and listing of GTB HoldCo including its global depository receipts (GDRs) listed in London. GTB stock is up 46.7 percent in the past year.
GTB will also push to get a credit risk rating for the HoldCo, according to Agbaje.
The bank will build a payments business from scratch, but may eye acquisitions for some of the other businesses it intends to enter into such as Asset management and Pension Fund Administration, but ultimately would not be willing to overpay for a deal to happen, Agbaje said.
Challenges the bank will face as it embarks on the HoldCo model include execution risk, especially for technology it needs for the payment space as well as the fight for market share it will have to engage in with the dominant names in the Pension and asset management space.
“We have a go to market plan in place which we intend to execute so that in 5-years you can say to people and shareholders that this was the right move,” Agbaje said.