GTCO's payment plans: No longer guaranteed?
What's happening to the last infinity ring in GTCO's gauntlet?
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“Same Orange, more range,” was Guaranty Trust Bank’s new slogan when it completed its change of structure to ensure that it became more than just a bank. Under its holding company structure, GTCO, the plan is to add other businesses, such as asset management and a payments business.
There’s not been a lot of action from GTCO since August, and it may have contributed to a fall in its share price - in January, Zenith bank had a bigger market capitalization than GTCO. For years, GTB was Nigeria’s biggest bank by market value, but declining profits and Earnings Per Share for H1 2021 amidst uncertainty about its plans for the future may explain its recent price drop. The bank may push back by arguing that some of the pieces it needs for its Holdco plans may take some time to structure. Fortunately for its shareholders, some action happened last week when GTCO announced the acquisition of two subsidiaries of Investment One. Both subsidiaries are pension and asset management firms.
GTCO adding asset and pension management to its gauntlet.
For GTCO, entering into the pension and asset management business is critical, and helps to shape the company as more than a banking giant. It’s especially important when you realise that they’ve expanded to those new frontiers within a decent timeline and by way of acquisition, just like it said it would. All that’s left is the launch of its payments business, but that has largely been shrouded in mystery.
Nothing will prompt questions about GTCO’s payments plans this week than the fintech startup, Flutterwave, raising $250 million to push its valuation to $3 billion. GTCO shareholders may be excited by seeing the big valuations that payments businesses are enjoying because, for them, it’ll mean that restructuring was the right move after all. Also, the fact that big telcos like Airtel are spinning off their mobile payments business at big valuations can’t also hurt.
What sort of valuation will a standalone GTCO payments business command? GTCO has GTCollection, GTPay, a consumer banking app and a remittance business which offer some of the same services as Flutterwave.
Why GTCO’s shareholders may be unsatisfied: GTCO’s chairman, Segun Agbaje, was right about one thing: most banks are growing at 5-7% per cent and even that may be unsustainable. The next real big move for the banks to capture value is to compete in payments, which is one of the hottest spaces in Nigeria right now. His thinking is shared by Access bank and Sterling, both of which have also adopted holding company structure. All three banks have one thing in common: since their 2020 announcement to make their payments play, they have not made much headway.
While we can only speculate about their plans, Stanbic has shared its own plans to also build a payments business. First Bank of Nigeria has also made huge strides with FirstMonie, with 114k agents for its agent-banking business and other payment channels- one can only wonder if FBN has any plans in the future to spin off its payments business. It could very well command similar valuations as OPay and TeamApt.
“If you look at our financial statement, you will see that our payment business is growing by about 60%. So, that is an area we like. “GTBank is going to win [the payment space], and we’re going to win very easily.” - Segun Agbaje, Social Media Week 2020
On GTCO’s part, we can only ask more questions about what its timeline for the launch is and if it’s experiencing any technical issues. In December 2021, several GTBank customers reported experiencing unauthorised debits, months after a major publication reported a mass exodus of developers from the bank. While its payments play remains shrouded in mystery, we can only speculate about the last infinity stone in the gauntlet that is GTCO.
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THE SIGNAL - WHY VALUATIONS MATTER
The most exciting news this week was that the Nigerian startup, Flutterwave is now valued at $3 billion. That’s a pretty big figure, and for anyone who’s looking to invest in a company, a valuation lets you know what a company is worth.
Founders of a business determine the company’s valuation using different metrics. But here’s one thing that holds true if you own a business: don’t price your value too high or too low. Whatever valuation you arrive at must be matched by your growth targets and numbers.
For investors: Valuations help you determine what your stake in a company is worth and the amount of money you’d make in an exit.
Ready to invest in your first startup? Check out the impressive array of startups you can start investing in right now at great valuations!
$94 per barrel? That’s nothing
It must be a confusing time for Nigerians who have always associated high oil prices with an upturn in economic fortunes. We speak of the years when oil prices hit $100 per barrel with nostalgia, and others even argued that the achievements of some presidents were unimpressive because they governed at a time when there was an oil boom.
Yet, at the close of last week, oil hit $94 per barrel and it seems inevitable that it will hit the $100/barrel mark. Yet in the middle of this price boom, Nigerians are dealing with a petrol scarcity that is causing long queues at fuel stations, and petrol subsidy payments will cross N3 trillion this year alone.
What is the racket in petroleum subsidy payments? No one knows for sure how much petrol is consumed in Nigeria on a daily basis. Between the NBS and the NNPC, the data varies and at some point, the NBS was honest enough to throw its hands up and say that all the figures that exist are guesstimates.
While still dealing with guesstimates, we’ve seen a massive increase in Nigeria’s petrol consumption in the last six years. In 2012, Nigeria consumed 35 million litres of petrol daily, and nine years later, that figure hit 55.39 million litres. Today, Nigeria’s finance minister guesstimates that figure at 65.7 million litres daily, implying an increase in petrol consumption by 10.31 million litres daily between in just eight months (August 2021 to January 2022). It’s worth asking: without data, how do the FG and NNPC ensure that they’re not overpaying for fuel subsidies?
While that question is up in the air, President Muhammadu Buhari will ask the National Assembly to pass an N2.55 Trillion supplementary budget, majorly for fuel subsidy. Will the National Assembly point out to the President that petrol subsidies should no longer be made as stated by the Petroleum Industry Act (PIA)? Or will everyone look away because fuel subsidy removals are a wildly unpopular idea in an election year?
WHAT I’VE BEEN READING
This Special Report by the Financial Times on different sectors of the Nigerian economy
What happens when more companies start acting like banks?
Edited by: Abubakar Idris
See you on Sunday!