Guaranty Trust Bank Nigeria Eyes Mozambique to Double Income From Africa

LAGOS (Capital Markets in Africa) – Guaranty Trust Bank, Nigeria’s biggest lender by market value, plans to open in Mozambique as it targets the country’s gas market to help prop up profit from African subsidiaries.

The lender will enter Mozambique in the first quarter of 2019 “to capitalize on the country’s offshore gas boom,’’ after it opens in Tanzania in January next year, it said. The expansion will increase the contribution to profit by African operations outside of Nigeria to as much as 20 percent in the next 10 years from 9 percent, spokesman Meksley Nwagboh said by email.

Nigerian banks have struggled to reduce non-performing loans and increase lending as the economy recovers slowly from its worst slump in about 30 years, triggered by the 2014 collapse in the price of crude oil, the biggest source of government and export income. Mozambique is home to one of the world’s biggest gas discoveries by Italy’s Eni SpA and Texas-based Anadarko Petroleum Corp. The economy is forecast to grow 4.1 percent this year and 4.5 percent in 2018 from 4.4 percent in 2016, according to a Bloomberg News survey.

The Lagos-based bank says it’s expecting improved returns from its Kenyan subsidiary next year after the country’s elections, while impairment charges in Ivory Coast, Liberia, Rwanda and Uganda are expected to abate, it said. Its ratio of non-performing loans to total loans improved to 3.9 percent in the nine months through September from 4.1 percent previously.

The lender, which operates in nine countries outside Nigeria, including the U.K., says it is “very optimistic’’ it will surpass its 2017 profit forecast as an increase in foreign currency supply in the West African nation boosts trading by banks. Its profit for the nine months through September rose 5 percent to 125.5 billion naira ($349 million).

Guaranty Trust plans to increase the volume of fixed-income securities in 2018 “to compensate for the paltry loss from asset yield’’ in Africa’s most populous nation, according to the lender. It aims to grow the loan book by 10 percent and will target “top end and high quality’’ customers to boost income, it said.

The Central Bank of Nigeria in April opened a so-called Nafex window to provide cash to portfolio investors at market-determined rates. Four months later it took a step to unify its multiple exchange rates by allowing banks to use the Nafex rate when quoting the naira. The move increased the supply of dollars needed by manufacturers for imports, boosting letters of credit transactions by banks.

The yield on the country’s naira debt due April 2037 has declined since August as the government targets a reduction in borrowing and costs. The lender “locked into longer tenured treasury bills’’ which will enable it to sustain interest income amid the drop in market yield, it said.

Source: Bloomberg Business News