GT Bank plans to reduce lending and bond trading in Ghana

Nigeria’s biggest bank by market value, Guaranty Trust Holding Co., has announced plans to reduce its lending and bond trading in Ghana due to a $77m impairment in the West African nation.

The bank will instead focus on other high-yielding African markets to boost lending by 15% this year.

This move will enable the firm to increase its profit-before-tax growth by 31% from 214.2 billion naira in 2022.

Guaranty Trust operates GTBank in Ghana and the country is currently restructuring most of its public debt, causing losses for financial institutions.  The bank is facing a tough time in its second-biggest market, Ghana, due to the country’s restructuring of most of its public debt worth $49 billion, according to reports.

Ghana exchanged notes worth 87.8 billion cedis that paid an average of 19%, with bonds returning as little as 8.35%, causing losses for financial institutions. Many overseas creditors are still in talks with the authorities regarding the issue.

The bank had 167.6 billion naira of debt securities in Ghana, while rival lender Zenith Bank set aside 123.4 billion naira to account for the restructuring.

Guaranty Trust plans to expand credit by no more than 5% in Ghana and limit itself to treasury bills for securities investments.

According to the bank’s Chief Executive Officer (CEO), Segun Agbaje the harsh operating environment and high inflation rate in Ghana makes it difficult for businesses to make money and pay back loans.

You’re talking about a country that has defaulted on its sovereigns, and has not even yet given complete clarity as to how it’s going to handle all the default scenarios,” Agbaje said at an investor conference call in Lagos. “If you’re running high inflation, it’s going to be very difficult for businesses to make money and pay back loans,” he said in an interview with Bloomberg, referring to the inflation rate of 45% in West Africa’s second-largest economy.

“If you go out to book loans aggressively you are just going to make non-performing loans,” he said. “Obviously any country that defaulted, in terms of sovereigns means you have a harsh operating environment.”