Good day, ladies and gentlemen, and welcome to the Guaranty Trust Holding Company full year 2024 conference call. All participants will be in listen-only mode. There will be an opportunity to ask questions later during the conference. If you do need assistance during the call, please signal an operator by pressing star and then zero. Please note that this call is being recorded. I would now like to turn the conference over to Segun Agbaje, Group CEO. Please go ahead.
Thank you. Good afternoon, everybody. Thank you so much for joining this call. With me on the call today, I have Miriam Olusanya, who's the Managing Director of the Bank. I've got the Group CFO, Banji Adeniyi, on the line with me as well. Because we put this online, the investor presentation, since Monday evening, we basically will go straight into Q&A, and there'll be no presentation before this. Thank you again for joining, and I'm ready to take the first question.
Thank you, sir. Ladies and gentlemen, if you would like to ask a question, you may press star and then one on your touchstone phone or on the keypad on your screen. You will hear a confirmation tone that you have joined the queue. If you, however, wish to withdraw your question, you may press star and then two to remove yourself from the question queue. Once again, if you would like to queue for a question, you may press star and then one. The first question we have is from Timothy Wambu of ABSA. Please go ahead.
Thank you very much. Good afternoon. Hi, Segun, Banji, and the rest of the team. Just a couple of questions from my end. The first one is, first of all, congratulations on the good set of results. Driven by the high interest rate environment and also a lot of support from the fair value gains on swaps, could you give us an idea whether we should expect a change in the cross-currency swap position? Maybe give us a sense of what happens given that we have seen the Naira really appreciate so far in 2025. What is your outlook, you would say, on those fair value gains on swaps? My second question is the reason why you went with a phased approach to capital raising. Just give us an idea why that was. What is the thinking behind that?
Lastly, on your HabariPay payment subsidiary, we know it's a very competitive landscape. One of the competitors happens to be a unicorn with over 1 million POS devices. I can see very strong growth so far in 2024. Just give us an idea of how exactly you're looking to grow that payments business. Is it, I can see very strong growth from merchant acquiring? Is that the strategy, as well as switching capability? Thank you.
Okay, thank you very much. Like I said, I always try and just expand on the first question. Maybe I'll make it easier for the next couple. Your first question really for me revolves around what I would call the quality of earnings of 2024. Yes, it was a high interest rate environment, but I really don't think you'll see anything significantly different in 2025. If you look at the total yield on assets, it was 11.7%. I think we can do 11.7% again. Even though the interest rates might not be as high, I also don't think they'll drop to the point where a yield on assets of 11.7% will be difficult to do in 2025. Swaps are pretty much gone. Fair value gains will pretty much disappear, in my own opinion, but I think we're very ready for that.
Even if you look at the fair value gains that we made in 2024, we tipped provisions against them to over NGN 100 billion something. Most of the income that came in 2024 is actually from core earnings. If you look, you will see that interest income is up, interest income is up 144%. That is core. Non-funded income is up 27%. When we look at that, we believe that the core business is strong enough to deliver strong profitability and that we're not that worried about fair value gains. In terms of the capital raise, the first part of the capital raise was really aimed at locals and retail. I think we achieved our objective in terms of retail and local. We raised NGN 208 billion from over 200,000 people. We have ticked that box.
We will have the second round of capital raise, as we've indicated in our forecast page. Obviously, I can't comment too much so that I don't kind of get into any trouble about giving too much information about the capital raise, but there will be a capital raise. It'll probably be around NGN 180 billion worth, and then we'll be done. The business model for Habari is actually quite simple, and the money from Habari is coming really from like three or four verticals, very distinct. The first one, as you said, really in the highest, is value-added services. Value-added services is strong. It's the bread and butter of the business, doing very well. Second line is switching, again, very strong, growing very strongly. Our third one is merchant acquiring, which again is doing okay. It's also growing. You talked about the POS business.
POS business, we're going to go more aggressively into in 2025. I think the combination of the bank and Habari means that we have a good chance of dominating that. We really do not worry too much about someone who has 1 million POSes. If you've been following Nigeria anyway, in terms of POS charge, Guaranty Trust Bank is charging zero because there are other lines of income. I think between the bank and Habari, we're ready to take on the POS business, and you will see that business become a lot more important to both entities in 2025. Hope I've answered all your questions.
Yeah, thank you. I'll fall back in the queue. Thank you.
The next question we have is from Ngozi Odum of Cardinal Stone. Please go ahead.
Thank you very much, and good afternoon. My first question is on your fair value gains on financial instruments. I believe previously it was alluded that this was possibly linked to the bank's considerable or substantial NGN 800 billion equity investments. I just want to know if that's actually the case. The fair value gains that we saw for full year 2024, were they linked to the bank's holding of substantial equity investments? In Q4, it was a particularly weak quarter for GTCO. I think aside from the expected rising taxes and then the write-off that was booked, non-interest revenue was also particularly weak. We saw some substantial declines in net fee and commission related to credit-related fees, account maintenance, and e-business income. Just wanted to provide more clarity on that.
Lastly, for your loan segments, your aggregate and individual loan segments, these two combined make about 17% of your loans, and we saw a material uptick in NPLs. Wanted to know pretty much what's driving those NPLs and what are the strategies that are being deployed to address those NPLs. Thank you.
Okay, first one's very easy. NOP zero. So what are the fair value gains you see on the P&L that are coming from the equity position? I wouldn't necessarily agree with you that quarter four was weak. I think quarter four was strong, but we did choose to take provisions on our last forbearance loan, which we did. We are glad we did that. If you wrote that back, it wasn't as weak a quarter as it might appear. It was deliberate, it was strategic, and it was tactical to take those provisions. In terms of loan segments, total group NPL, by the way, is 5.02%. In terms of the bank in Nigeria, NPL is 3.5%. This is a completely de-risked balance sheet, in our own opinion. Going into 2025, we think it's one of the big strengths of the bank.
If you look at stage two loans, stage two loans are now 2.6% of total loan book, down from 16%. When we look at where NPLs are today, we don't think we've had it much better in the last few years. It's actually one of the positives and tailwinds that we think we're going to enjoy in 2025. Very shortly, I think NPLs are really down. If you look at stage two loans, which is pretty much always a good indication of what you can expect from a loan book going into the future, we're in a great place. Thank you.
The next question we have is from Olumide Sole of Renaissance Capital Africa. Please go ahead.
Good afternoon. Congratulations on your results. Impressive numbers. We are starting with your investors' presentation. You are likely that you're currently on a green transaction. Can you shed more light on that?
Sorry, you're a bit muffled, so I need you to kind of speak a bit more clearly. I'm having problems speaking myself.
I said congratulations on your results. Impressive numbers. Your profitability metrics, they are also very impressive. My question is, firstly, on your investor presentation, you are likely that you are currently undergoing a potential transaction. Can you shed more light on that? You mentioned something about your forbearance. Is it now over? It is totally provided for now at this point. That was all from my end. Thank you.
Thank you very much. In terms of the potential transaction, like I said, we are kind of in the middle of a potential transaction, putting it together. I obviously can't shed too much light on it, but like I said, we'll be looking at somewhere around NGN 180 billion-NGN 200 billion transaction, having done the first one. If we're lucky, we'll try to be done by the summer with that. That was really around that transaction. Forbearance, yes. Like I said in an earlier question, we have zero forbearance loans left on our books. We've taken the total provision, and we've written off the loan as well. If you've been following it, the CBN actually gave you permission in a circular which they issued, where before this, you needed to have provided for 12 months before writing it off. They allowed you to do that.
We have basically written off the loan. We have provided 100%. We have written off. We have no forbearance loans left on our books. I hope I have answered the two questions.
Thank you. Thank you.
The next question. Apologies. Ladies and gentlemen, just a reminder, if you would like to ask a question, you may press star and then one. The next question we have is from Sadiq Saferio of SBG Securities. Please go ahead.
All right. Good afternoon, everyone. Please can you confirm that you can hear me?
Yes, I can.
All right. Yeah. Thank you very much for taking my question. I'm just straight to the question. I wanted to confirm, looking at your Naira loan book, actually grew by about 5%. Naira deposit grew about 2%. I wanted to understand the rationale behind this strategy. Is this expected to continue in 2025? I know you stated in the presentation that you're limited about the guidance you will give, but I just wanted to understand how you're looking at growing your loan book and deposit in 2025. Because on one hand, in the presentation as well, you said there's going to be aggressive deposits. Seeing Naira deposit at 2%, we just want to get clarity about how that will shape out in 2025. I also wanted to know if you're concerned about shrinking market share for GTCO when it comes to the asset size related to other banks.
Is this a concern? Do you think going into this period where we're now going to be seeing rates sort of moderate, could this be a key factor for GTCO to look out for? Regarding the line talking about increased impairment charge due to a write-off that was made on a key oil and gas name, I wanted to confirm if this is relating to the Aiteo transaction that you mentioned in your half-year call that you would write off at full year if there was no positive updates. I just want to confirm if that is. Is it also correct to assume that the significant reduction in your stage two loans was related to this write-off or this Aiteo transaction? How are you looking at your asset quality going into 2025?
I understand that you said you see the bank at a better place going into 2025, and I think it's a positive. Considering the environment, how is the bank looking at asset quality in 2025? Thanks.
Okay. Let me start with your last question since I have that pretty well memorized. Yes, the write-off is related to the Aiteo loans, so it's gone dusted. Asset quality, like I said, if your stage two loans are 2.6% of your loan book, it means you've got a completely clean loan book, and you have a very long runway as to what you can book. It will then bring me to your first question. When you look at our Naira loan book for 2024, you first have to take into consideration the fact that we wrote off a major loan, and that if you put that back, you would see loan growth of about 14%. Our deposit growth, I wouldn't focus just on Naira because if you look, we have a dollar balance sheet as well.
If you take the dollar balance sheet in terms of deposits, we're 35% loan growth. Sorry, deposit growth, if you adjust for that, we're at like 5%. At every time we look at the asset side, we always seem to concentrate on the loan book. You must remember that when you look at the asset side of your balance sheet, depending on the strategy you've played, there are many levers you can pull, and that's what we did in 2024. While the loan book didn't grow that much, if you look at investment securities, it grew 68%. If you take money market placements, it grew 108%, which led to an interest income growth of 144%. We don't kind of fall in love with loans. We fall in love with earning assets, and we play with that, looking at what the environment kicks up.
We're very comfortable with what happened to us in 2024. If I were you, I'd rather focus on the interest income growth, which was 144%, which means we played with the different asset classes the way we saw best. In terms of asset growth, honestly, versus competition, we really are not worried at all. What we look at is scale. As you can see with the results and everything, the scale in the business is good enough for now. We will spend 2025 pushing more scale onto the balance sheet. We will grow the balance sheet to make sure we meet the numbers we've set for ourselves. We're not into the game of one asset of the bank is bigger than the other asset. We look at the business we want to do. We make sure we have enough scale.
As the results are showing you, there is more than enough scale to bring out the profit we need out of the balance sheet. I believe I've answered your three questions.
Yes, you did. Thank you very much.
Thank you.
The next question we have is from Isaac Osaro of WSTC Financial Services. Please go ahead. Isaac, your line is live. You may go ahead to ask your question. It seems that there is no response from that line. The next question we have is from Seki Mutukwa of Ashmore Group PLC. Please go ahead.
Thank you for the call. Two questions, please. The first one is just whether the sort of net reserves from the CBN in terms of what's been announced, essentially trying to understand how relevant that is to you as a CEO of a group in Nigeria, amongst other CEOs, and whether anything official, as far as you're concerned, has come out or what we've perhaps seen from X and the like is not enough for you to sort of take that as done and dusted. The second question is more trying to understand the mood music from the Nigerian corporates when it comes to the investment climate. Now that you've had a lot of reform, are they dusting off plans for adding capacity, perhaps?
Are they looking at maybe borrowing for things they've been sort of waiting for a little bit more clarity on the domestic side before we even think of what internationals think? Thank you.
Okay. Thank you again. I'll just try and articulate what I hear. Basically, we're looking at the macros in Nigeria at the moment. When I look at the macros in Nigeria, I think we're at a great place. I think I visited Ashmore in the summer when we were going to do this transaction. Our position was always that the country had the ability to maintain a +5 , -5 , or 1,500. That's what has happened. If you're a corporate, what you really care about is stability. If you look at the exchange rate, there's been plenty of stability. You also care about liquidity, and there's been liquidity. Interest rates are not crazy. They're around 22%-24%. That's good enough to do business, especially in a country like Nigeria when you look at the population and the ability to consume.
From where we sit, we think looking at the macros in terms of interest rates, exchange rates, very positive. You talked about net reserves. Obviously, I did not get an official pronouncement, but I read what you read. If we are talking NGN 23 billion in net reserves again, that just goes back to my liquidity question, to my liquidity answer. Before that came out, we were very comfortable because we judged the reserves as well by whether the market is liquid. The market has been very liquid. You can buy what you want. You can sell what you want. Even before the net reserves figure came out, there was enough liquidity in the system where we were upbeat. If it is NGN 23 billion, I am upbeat.
I was upbeat before that figure, gauging by the liquidity, dollar liquidity in the system in terms of buying and selling. Yeah, very positive about the macros I see today. Stability in FX, liquidity, and then interest rates at a level where you can do business. Yeah.
Okay. May I quickly just follow up on that point on the mood music?
Sure.
From the bank in Nigeria, are your origination teams getting sort of incoming calls that they haven't had for a long time? As I sort of try to gauge, hi, sorry. Can you hear me?
Yeah. Sorry. Yeah. Go.
It just broke off. No, sorry. I was saying, are the origination teams getting phone calls at the bank in Nigeria that they hadn't before from corporates for quite some time? How busy is that side of things when you get to the nitty-gritty of the call phase?
I think we're very busy. Even last year, we were still busy. If you look at our loan book, 87% of it is at the corporate end. We are still getting all those requests today. Obviously, you have to manage your Naira liquidity position and make sure that you keep your NIMs. In terms of the music, there is enough high-end deal book and transaction volume to keep your corporate loans growing. Yes.
Okay. Perfect. Thank you.
Thank you. The next question we have is from Samson Esemuede of Zrosk Investment Management. Please go ahead.
Hello. I just wanted to make sure. Can you hear me?
Yes, I can.
Hi. Hi, Segun. Thank you for the call, and congratulations on the results. If you could speak to two things, please. One is the trend in your deposit because I saw on a key-on-key basis, there was some reduction in your deposit base, and particularly in the retail consumer segments, which underpins the strength of your low-cost liabilities. If you can touch on that and the trends that we're expecting through 2025. My second question is around how do we think about dividend policy? Obviously, given the operating environment, the payout ratio has sort of been all over the place over the last two years. Historically, you've paid north of 40% of your cash earnings in dividends. Going forward, what should we think about in terms of dividend policy outlook from GT?
Thank you very much. In terms of deposit trend, I think you can expect a positive trend. It is no secret that the blip you probably saw was when we changed our core banking software. We did run into some trouble for about three weeks in October when we did the transition. We lost some of our deposits at the time. As you can see, we are trending back, and we are kind of back where we need to be. I would say the trend is up. Retail is good. We had the blip with the core banking changeover, which, thankfully for those who are customers, I hope you will bear as testament that things have stabilized and we are working. In terms of our dividend payout ratio, if you look at this 2024, we actually paid out 61% of allowable permissible PAT by the regulator.
I think on that basis, I would say you can continue to count on over 60% of permissible amounts we're allowed to pay out. Some people do the calculation, and they give us 33%. It is actually better than 33% because you have to dot 85% of fair value gains to arrive at what you're allowed to pay. The simple answer is we will always pay about at least 60% of permissible PAT.
If I could just follow up on the balance, if you don't mind. You mentioned earlier on about being aggressive around balance sheet. Obviously, you've had sort of a conservative stance in terms of balance sheet growth and focusing more on efficiency historically. When you think about balance sheet expansion, are you looking at instruments outside of just trying to mobilize your low-cost deposits? Are you thinking about other financial instruments like Eurobonds at the moment?
Absolutely not. I think when we look at our business, we don't even take into bank and we don't really take other borrowings. We try to grow our business on the liability side from customer deposits, and we deploy it into investment securities, money market placement, and loans. No, we don't feel the need to grow the balance sheet in any hurry. We think that doing what we do, preserving the NIMs, we have NIMs at about 10.8%. Balancing the NIMs and growth is how we're going to play 2025.
Okay. Thank you.
Ladies and gentlemen, just another reminder. If you would like to queue for a question, you may press star and then one. The next question we have is from Gideon Oshadumi of Chapel Hill Denham. Please go ahead.
Good morning. Sorry, good afternoon. Thank you for the.
Apologies, Gideon. Your line has a very bad static noise on it, sir.
How about now?
Now the static is gone, but your voice is very low.
Okay. Okay. Good afternoon.
You had fixed it, sir. The static noise is back. Can I?
The static is back.
Yes.
Okay. Okay. I think we should be good now.
No, it's not better yet, sir. Sorry. I'm going to have to just move to the next person. I'll get someone to check your line with you. The next question we have is from Ifeanyi Osele of Cardinal Stone. Please go ahead.
Yeah. Hi. Good afternoon. Gideon, I'm hoping you can hear me.
Yes, I can. Good afternoon.
All right. First of all, I'd like to say congratulations on your very impressive results for FY 2024. I'll just be going through a few questions which I have. Firstly, for looking at the oil and gas space, the current happenings we've been having there with the whole Trump 2.0 and the impact of the volatility of oil prices, given that the upstream oil and gas makes up about 31% of the loan book, is this some sort of worry the bank has? Is this causing some sort of worries for the management? How do you think this might impact your loan book going forward in FY 2025? Also, on your plans for profitability in FY 2025, is there going to be anything that you're going to be doing differently, any new strategy for your profitability in FY 2025?
Because looking at FY 2024, I believe it was largely driven by high interest income. That is from the 364- day T-Bills and also money market placements. Is that what we are supposed to be expecting for FY 2025, or is there something new on the table? That is all from me for now.
Okay. Let me take your first one. Oil and gas upstream book is actually not 31%. It's 25%. And we actually are not worried about that book at all. No matter what, we stress the oil price. When we give all loans, I think at $40, we're fine. So it's 25% of the loan book. We're not concerned at all. The one loan that was giving us any concern, we've provided for and written off. So oil and gas loan book is fine. When you talk about new strategy for 2025, I think we're very consistent in what we're doing. If you watch us very closely, we're driving different things. It's not just when you talk about interest income, which I'll come to, which is really core business for any bank. That's what you need to maximize.
You also try to maximize your commissions and fees line, which is your non-funded income, which is what we're doing. That's how basic banking is. It's not rocket science. When you look at Guaranty Trust, what we're doing is aggressifying our earnings and k eeping the risk down. When you look at us today, if you look at the bank in Nigeria, the bank in Nigeria is contributing 77%. We're pushing, and we'll continue to push. West Africa is contributing 18%. That's another push to group profit. We need to work on East Africa. We know that it's 1.5%. We push it. That's a long runway for us. We take U.K. We're pretty happy. It's about 1.7%. We might push it to 2%, doing what we do, very efficiently, scaling up, keeping the NIMs, cost optimization. It will lead to a great bottom line.
The non-banking businesses have also come good. They're 1.1% of group in absolute money. They made NGN 14.5 billion this last year. Visa franchises, the three years ago, we paid NGN 11 billion for. Basically, we've diversified, and we're scaling up, and we're remaining very efficient in this cost optimization. That really is what we're driving. We don't need to do flip-flops or flip on our heads. We just need to run this business very efficiently. That's what we're doing. We're not going to do anything drastic in 2025. We're just going to get better and better at what we do. That's the strategy for 2025. We're reasonably confident that we will deliver these numbers. Interest income is good. It's a great thing for a bank to generate and grow its interest income by 144%.
I mean, personally, if we could do that every year, then we'd be happy.
All right. Thank you very much. That was very helpful. Thank you.
The next question we have is from Ronald Gadia of Dunross. Please go ahead. Ronald, your line is live. We are receiving no response from that line. I will take the next question. The next question we have is from Patrick Atuanya of Money Central. Please go ahead.
Good afternoon. Can you hear me?
Yes, I can.
Okay. Congratulations, Segun, on the stellar results.
Thank you.
Yeah. I just have two quick questions. A lot of the questions have been asked. On the investment securities, you had a new exposure to NGN 248 billion in U.S. Treasury notes. That was like zero in 2023. I just wanted to know some of the rationale behind that, especially with everything going on in the U.S. right now with the tariffs. Secondly, there was additional investment of NGN 208 billion in GTB Nigeria in 2024. I don't know if this has been answered. Just wanted to know some of the breakdown and how you expect that to translate into earnings growth for the next couple of years. Thank you.
Okay. The first one, U.S. Treasuries, no matter what's happening in the U.S., I don't think the U.S. is about to default in any short term. The reason that now exists in our books is, remember, we now have a funds management business. We are quite conservative. Rather than focus on Eurobonds, which is dangerous, we tend to put more of our dollar book into U.S. Treasuries. I hope you will agree with me that U.S. Treasuries are probably safer than emerging market Eurobonds. That's why they're on the books, is for the funds management business. The NGN 208 billion is what we raised. Unfortunately, for those who did the offer and read the offer prospectus, what we're doing with the NGN 208 billion, we're very transparent about. Some is working capital. Some is additional branch network. Some is IT.
Basically, we're just going to bring more efficiency into the business. Yes, it will contribute to growth in 2025. The thing most people don't realize is that we actually didn't have that money at all in 2024. There was capital verification and everything. We kind of got it on the last day or the first day. It really didn't add to earnings, but we are paying a dividend on it because we were given the money in August. We believe we owe a dividend to the people who gave us the money. Yes, it will contribute to earnings in 2025 because we now have the money and we can select the equity.
All right. Thank you so much.
No problem. Two questions. Thank you.
Yeah.
Thank you. The next question we have is from Ronak Gadhia of Dunross. Please go ahead.
Hello. This is actually Kato Mu kuru. Ronak and I are on the road together. Hello, sir. How are you?
Okay.
Congratulations on a—excuse me?
Yes, I can hear you. Please go on.
Yes. Congratulations on a great set of results. I just wanted to talk about the potential to really leverage the balance sheet and increase your competitive positioning. I mean, if I look at it, you've done an incredible job of boosting cash to an all-time high, keeping very, very low asset quality, having tremendous liquidity and capital on the balance sheet. Now, as you go into the growth phase, I just want to get a sense of how much growth you can deliver on because I think it must be tremendous in terms of your ability to position the bank vis-à-vis your competition in the next two to three years. The other question I was really keen to understand a little more on is what your thoughts are on the internalization of your business model, particularly in East Africa.
Are there any thoughts now that you have this capital and liquidity and all the success you've had in Nigeria making a real big push into East Africa? Thank you, sir.
Okay. Thank you very much. Obviously, we're going to try to leverage the capital. Nobody needs a capital adequacy ratio of 39%, which means we've got to sweat the capital. We'll sweat it without taking on due risk. There are opportunities, and it will dovetail into the question on East Africa. First of all, I think that there are certain places that we are underbranched in Nigeria, so we will deploy some of that capital. It will give us growth. There are regions in West Africa, even though West Africa is doing so well, especially Price Control West Africa, where we feel the need to put more branches. Ghana, which is a great franchise. We will have some more branches. Of course, there's technology. We're spending a lot more on technology. I think we aren't very vested in technology in the past.
We are playing a bit of catch-up now, but it is working. You will see us work technology. Of course, we will use the capital as working capital as well so that we can sweat the capital, deploy it, and bring down the capital adequacy. Just like you pointed out, and I said earlier on, one of our disappointments right now is East Africa, but we are going to fix it. We are not going to fix East Africa by taking all the four countries at the same time.
We are going to focus on Kenya and Rwanda, and we are going to try to scale up. We are going to put better IT in. We are going to put better manpower in, and we are going to increase our branch network. It is impossible to scale up when you are working with five or six branches in big countries or nine branches.
We will try to get to the optimum number, find an equilibrium in terms of a branch network and support it with technology, whereby we can start to unlock the value in East Africa, starting with Rwanda and Kenya. This really very helicopters how you're going to see us working the capital over the next two to three years. We don't have to worry too much because we don't have legacies in terms of the loan book. I hope I—
Thanks, Segun. Yes, you did. If you wouldn't mind, Ronak had a follow-on.
Thanks, Segun. This is Ronak. Like he mentioned, we're traveling together. Mine was just on the payment side. Could you maybe just highlight what's the competitive advantage GT has? Or maybe its banking peers and its non-banking peers in terms of what will be the driver of growth for that business? Thank you.
Okay. I think we have a couple of advantages, which people thought was a disadvantage when we first started. I used to hear that bank-led FinTechs or bank-owned FinTechs could not do well. Now I am hearing that bank-owned FinTechs are the only ones that can do well. When you come in as a bank-owned fintech, you have a massive customer base which you can tap into, which is an advantage that Habari has. The second thing we have is the business model we started with. We never came up with a business model of just growing volumes and then selling out for capital. We had a business model that leads to profitability, which is why we created value-added services that paid their bills and was the bread and butter. Then we went to a switching business. Now we are connecting other banks.
We're collecting other FIs, and the volumes are growing. The third thing we have is the merchant acquiring business. Now we're going heavily into the POS business along with the bank. These are the advantages we have, which people thought were disadvantages. This is owned by a financial holding company. We can leverage, and we can cross-sell both to pension. We can cross-sell to asset management. We can cross-sell to the bank. These are great advantages to have, which people used to think were disadvantages. Really, this is a speedboat. All this is done by about 60 people. In terms of cost efficiency, massive cost efficiency, profit was NGN 4.2 billion. I'm not sure I've seen the financials of many FinTechs who have done that well.
We are very, very upbeat, and we are very positive that the ability to cross-sell, one, to other members of the group, and now beginning to open the business to other FIs means a really long runway for Habari.
Thank you so much. Good luck with the capital market transaction.
Thank you.
The next question we have is from Abdulrauf Bello of Cowrywise . Please go ahead.
Hello. Good afternoon. Please, can you confirm if—oh, okay. All right. Congratulations on your performance in FY 2024. You've been the first bank to achieve a 13% profit. It's not a small feat. Well done. My question is about your business model. In terms of ROE, ROE relative to financial leverage is strong, in my opinion. My understanding is that the bank's low-cost strategy is the ultimate source of value. My thought is that the hard work of the past decades is still crystallizing at the moment. However, going forward, what kind of growth can we expect? What's the sustainability of the business model? What are the trends? If you could please shed some light around the trends in customer growth, especially retail customer growth over the last five years.
What are the product innovation efforts of the bank to keep it more strong, especially with the demographic trends, Gen Z things, and thereabouts? I just want to get a sense of trends to ensure that this retail strategy that has always powered the bank's growth is still there in 7, 10 years' time. My second question is around your loan book. I recall that in FY 2023, you were very bullish about loan book growth, and the guidance was as high as 30%. On the balance sheet, there was about 12% growth, but the net loans on the cash flow, I saw a net inflow, a positive figure for two consecutive years. I understand that there are macro dynamics, and management will make decisions based on the environment.
I would like to get a sense of the assumptions that went into the 30% loan book growth and what you eventually experienced such that it did not later happen. Those are my two questions. Thank you.
Okay. Sorry, I have to apologize to people if I—because I've kind of answered these two questions in different ways, but also you'll have to forgive me if I try to be—if I'm a bit concise in answering them again. Your first one's on the business model. I have explained the business model of Guaranty Trust Holding Company and the financial services company. We are extremely comfortable with our business model. In a country that has 200 million people, we don't even believe you've started to scratch retail. Our business model is not only based around retail because if you look at our loans, 87% of the loan book is to corporates. So it's a very strong business. If you also look, you'll see that SMEs contribute 12% of our deposit base. If you look, we started another thing called business banking, which is already at 3-4%.
It's very easy to look at it and not realize that it's shifting. It's very flexible. It's very agile. Also, I've taken the time to also explain that it's time to start looking at it as more than just Nigeria. When you look at us today, even as a bank, 18% of that profit is coming out of West Africa. If I take the regions, you've got a business model today that 20-something % of the profit comes from outside Nigeria. That's a business model that's evolving. You've also got a situation today where you've got non-banking subsidiaries that in under three years are making a profit of NGN 14.5 billion. That again is a changing business model. You're creating a holding company where you're diversifying earnings and you can cross-sell. Business model is definitely not static.
It is evolving nicely, but you have to watch it very carefully because we're not really going to announce to the world that, "Oh, we're changing. We're changing." You will see the change yourself as we start to cross-sell. That is why one of the people had asked me, "Why do you now have U.S. treasuries on your books?" It's because we have a funds management business that has AUM of NGN 643 billion and a profit of over NGN 9 billion. The business model's not static. It's changing very quickly. Cost optimization remains, but we continue to tweak. Cost optimization is now technology-driven and less than human-being-driven. There is a lot of optimization and a lot of things changing, but you have to look very carefully. In terms of loan growth, again, I answered that question.
There was loan growth, but every time, because the profitability has been so strong, we've also taken the opportunity to clean up the loan book. Where we're unsure about loans, whether we're forbearances, we've provided for them, we've written them off. That has doused the loan growth. Today, where the loan book is, like I said, stage two is 2.6%, so we have some runway to grow the loan book. We're not going to fall in love or fall into a trap that the only part of an asset side that you grow is a loan book. We're going to look for where the yields are best and where the risk is reasonable. If we find investment securities that we think are reasonable, we're going to grow it. That's why we did 68% on investment securities last year and only 13% on loans.
If we think money market placements are good and we can earn 5% on foreign deposits, then that's what we're going to grow. And that's 108%. Please don't look at our asset side as we will only grow the loan book. We're going to optimize the asset side. We're going to push what we think can give us the best money with the lowest risk. If it's a loan book, we'll grow it. If it's investment securities, we will. Please, when you look at us, focus less on the loan side of our asset side of a balance sheet and look at all the earning assets and see how we play with them. I hope I've answered your two questions.
All right. Yeah. Thank you.
The next question we have is a follow-up question from Timothy Wambu of ABSA. Please go ahead.
Thank you. Just a follow-up from my earlier question. Just to clarify, you say the swaps are gone, or did you mean the fair value gains on swaps are gone? IE, I'm thinking, given what you've seen with Trump, with the tariffs, ETC, just for if you assume that the Naira was to fall to about NGN 1,600-NGN 1,700, are we simply saying that you will not be able to book those fair value gains? That's the first question. My second question is that when you discuss the net open position, you normally mention FX equity. I was hoping you'd clarify what exactly that means when you say FX equity. And then just lastly, you mentioned that the second phase of the capital raising, you're looking at about NGN 180 billion. We've seen your share price increase significantly to about NGN 69-NGN 70.
Given the trend that we've seen whereby the public offers are issued almost on par with the market price, if I work out the balance of the NGN 9 billion that you initially mentioned with the NGN 4.7 billion that's already been introduced, you're probably going to raise about NGN 300 billion. I don't know. Are you looking at perhaps reducing the amount of shares you are looking to introduce? Thank you.
Let me start from your second question. No, I was actually referring to the NGN 180 billion. That will determine, so we're not going to start from 9 billion shares. We're going to start from, we want to raise NGN 180 billion-NGN 200 billion, then we'll issue the amount of shares. That's a clarification. We're not starting from an amount. In terms of fair value gains, you said 16-17. I don't really see and hopefully don't see that level of devaluation. Of course, if it happens, you'll see fair value gains because we still have dollar equity of $824 million. We're not putting that into our projections or our thinking for 2025 because we really do not believe you're going to see that kind of devaluation having had a correction of about 70% last year.
Yeah, thanks. Maybe just defining that dollar equity. What exactly do you refer to when you say dollar equity? Is this?
Dollar equity is our GDR. It's our GDR listing. That is what our dollar equity is. It's not part of our NOP.
All right. Just to clarify, the cross-currency swaps with the CBN are no longer there?
Yes. I believe that the last one might have gone out in 2025. Forgive me, fine. Not absolutely correct. I think it was about $200 million. And I think as we speak, it's gone.
All right. Thank you very much.
Ladies and gentlemen, just one final reminder. If you would like to ask a question, you may press star and then one. The next question we have is from Ahmad Zuaiter of Helios Seven Rivers Fund Ltd. Please go ahead.
Hi, Segun, can you hear me?
Yes, I can.
Just a couple of questions. The cross-sell ratio internally, do you measure that? Where is that? Where would you like to see that in the next five years? The second question is on the segmental returns on assets for the SME segment. I mean, that's one segment that over the last decade has actually underperformed the overall group. I think it's roughly around 2.5% ROA. Where do you see that evolving? What are the big drivers for getting that return on that segment up to where retail and corporate are currently? Thanks.
Okay. Let me start with the SME. Look, we're really big, at least as a person and an organization, we're really big on SMEs. If you look at the asset side, it hasn't grown, but the deposit side is growing about 12%. My belief is that to unlock that, you need to get to a point where really when you lend to it, if there's any diversion of funds to other banks or other entities, you can pull the funds. Once we can do that, it means you can reinvent the cash flow of SMEs, and you don't need physical assets to lend to them.
The minute we can do that, and as an industry, when you lend to an SME based upon cash flows, if they open an account anywhere and take the cash flow there, you can draw it, we would have sewn this up. Watching that space very closely, started with the deposit side. Once you can reinvent the cash flows of SMEs within the banking sector or financial sector, I think that's what will unlock it. We're watching closely. The low ROA is not because of a lack of focus. It's because we need to be sure about the asset quality when we go in there. We're not really yet monitoring cross-selling ratios, but we can see because we're just two, three years into a holding company structure, but we can see happening. We will start to monitor that when we think we have enough traction.
Clearly, if you look at the businesses and the profits on a lot of the other non-banking subsidiaries, there you will start to see what's happening in terms of cross-selling potential.
Just generally, how many of your existing corporate clients are also clients of Habari?
I don't have a percentage, but I would say probably about 30% because we do collections on the Habari platform.
Got it. Great. Thanks.
The next question we have is from Oluwayemisi Sunmola of Vetiva Capital Management Company Ltd. Please go ahead. Oluwayemisi , your line is live. You may go ahead.
Hello. Thank you very much. My major question would be, as we could see from the full year 2024 question, from the full year results, right, the bank recorded still over NGN 1 trillion in PBT growth. What would be the bank's projection for their full year 2025 earnings, given the fact that interest rates will see interest rates moderate during the year? Are the expectations that the bank would be able to match their stellar results in 2024, even exceed it? Secondly, like from a lot of the questions after, I've seen that the bank would be going through a whole lot of deposit, a lot of loan mobilization. Would that be the major driver? What would also be the impact of that? Would there be expectations given the increased PAT that the dividends would exceed the dividends paid this year?
That would be my major question.
Okay. Sorry. I have to be a bit vague about 2025 projections because of the transaction. We are pretty comfortable about 2025. Hopefully, as we begin to release quarterly results, you will start to see the trend. Yes, interest rates are coming down, but we do not think where interest rates are will affect significantly our interest income that we did in 2024. As I mentioned earlier on, the total yield on our asset book was 11.7. I really think we can still do 11.7 and still have the kind of names we enjoyed in 2024. When you add the fact that we will scale up the volumes to that, I think we will land it pretty safely. While I have to be a bit vague, we do think that even on the asset side, there is still enough room to still do investment securities.
Yes, the loan book growth will be better. There will also be money market placements. We are going to work the three lines. We are not going to be obsessed with just loan growth. We will grow loans, but we will also grow the other asset classes that are earning assets. We are pretty optimistic that 2025 will not look different or worse from 2024.
The next question we have is from Onome Ohwovoriole of Green Ticker Tales. Please go ahead.
Hi, Segun. Can you hear me?
Yes, I can.
Okay. Great. My first question is on your public offer. It did not quite hit target. When we look at other players in that space who had offers, there was some over-subscription. Why do you think the public offer did not do so well? Two is now that we have, I would say, a set that is a bit more accommodative of digital assets. On the asset management side of things, is there a possibility that we could have some products that would deal with either crypto or some other forms of digital assets?
Okay. Let me answer. First of all, it depends what your objectives are. For us, our objectives for our public offer were met. We would not say that we were not successful. We did not want chunk investments. We wanted to diversify it. We wanted as much as possible for it to be retail. That is what we got. We got a majority of 1,000. We knew we were going to do this in phases, and we told everybody on the road that that is what we were going to do. Having done that, our objectives were met. I cannot comment on other people's offers. I believe they also met their objectives. Objectives were met. Public offer for us, success. We will then do the next tranche of our transaction, which will be more institutional and will not be retail, and hopefully would have ticked that box.
No, I for now have no plans of really doing digital assets on the asset management business. At least for this year, we will stay with what we have.
All right. Thank you.
Thank you. The last question we will take is a follow-up question from Swadik Saferio of SBG Securities. Please go ahead.
All right. Thank you. I just wanted to ask regarding the windfall tax. What was booked for FY 2023 and FY 2024? Was it in line with what the management had thought or made provision for prior to when the final decision was made with FIRS? Is there already a discussion or an estimate for FY 2025 since that is going to be like the last chunk of the windfall levy that the bank would likely make estimate for?
Okay. What I'll tell you, I won't tell you whether we were under or over, but yes, we have it all. As you know, and if you look, it was comfortable for the banks what they took as windfall tax for 2023, 2024. I have to thank FIRS. I have to thank everybody. It really wasn't the storm everybody had predicted, which is a shame. The banks have taken 2023, 2024 windfall tax. There really isn't any estimate yet because we'll have to see what kind of revaluation gains there will be. If there's not a lot of volatility in the currency, then again, it won't be much. I don't expect that 2025 windfall tax will be material to the banks.
All right. Thank you.
Thank you. Ladies and gentlemen, that brings us to the end of the question and answer session. I would like to hand back to Segun for any closing remarks.
Thank you very much for all your questions. Thank you for taking the time out. Thank you for continuing to be supportive. I hope in our own way, we answered the questions to the best of your ability. I wish everybody else a successful 2025. Thank you.
Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your line.