Guaranty Trust Bank Plc (NSE – GUARANTY) is set to restructure into a financial holding company subject to the approval of the shareholders and the regulatory authorities. According to the Bank, it has obtained “in-principle approval from the Central Bank of Nigeria (CBN), and a no-objection from the Securities and Exchange Commission, Nigeria.
The Board of Directors of GTBank expects that “the financial holding company will have greater strategic flexibility to adapt to future business opportunities as well as market and regulatory changes than is currently the case,” following a near term comprehensive evaluation of the “operating and competitive environment in the Nigerian banking sector.”
This is according to November 5, 2020, corporate action filed with the Nigerian Stock Exchange (NSE) and signed by Erhi Obebeduo, the Company Secretary.
Guaranty Trust Bank has become the latest bank in Nigeria to restructure into a holding company, following the likes of Access Bank Plc and Sterling Bank Plc who made the move in September 2020.
- Read more; ACCESS going for a Holding Company Structure, enters South African market
- Sterling Bank Plc to restructure as a Holding Company
Under the restructuring proposal, “the issued shares in the Bank are to be exchanged on a one-for-one basis for the shares in a financial holding company. The Bank’s existing Global Depository Receipts (GDR) is also proposed to be exchanged on a one-for-one basis for new GDRs to be issued by the financial holding company” according to the filing.
The financial holding company will be regulated by the CBN and listed on the Nigerian Stock Exchange (NSE) and the London Stock Exchange (LSE). On the other hand, Guaranty Trust Bank will be delisted from NSE and LSE.
At the close of trading on Wednesday, the GTBank shares closed 0.31% up at N32.10 per share. YTD it is up by 8.08%. The 52-week high and low prices are N34.00 and N16.75 per share respectively.
The Group (comprising the bank and its banking subsidiary) is a leading African banking group. The group’s principal business is conducted in Nigeria, directly through the Bank where it offers a wide range of commercial banking services to corporate and retail customers.
The Bank also provides commercial banking services to individuals and institutions through its banking subsidiaries in the Gambia, Sierra Leone, Ghana, Liberia, Cote D’Ivoire, Tanzania, Kenya, Uganda, Rwanda, and the United Kingdom.
A holding company
A holding company, sometimes referred to as the Umbrella or Parent company, is a type of financial organization that owns a controlling interest in other companies, which are called subsidiaries.
The parent corporation can control the subsidiary’s policies and oversee management decisions but doesn’t run day-to-day operations of the subsidiaries.
Holding companies are protected from losses accrued by subsidiaries, for instance if a subsidiary goes bankrupt, the creditors of the subsidiary cannot legally go after the holding company. Thus the holding company will only suffer capital gain loss or decline net worth.
The financial and legal liability exposure of a holding company is limited.
The overall tax liability of the company can be reduced by basing parts of the business in jurisdictions with low tax rate.
By; Ifunanya Ikueze