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GTCO plans to limit lending, and securities trading in Ghana after impairment from debt reforms

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Guaranty Trust Holding Company (GTCO) plans to slow lending and bond trading in Ghana following N35.6 billion impairment suffered in the West African nation.

The bank will instead focus on home and other high-yielding African markets to boost lending by about 15 percent this year, according to Chief Executive Officer Segun Agbaje. That will help the firm increase its profit-before-tax growth by 31 percent to N214.2 billion in 2022.

Guaranty Trust had N167.6 billion of debt securities in Ghana, while rival lender Zenith Bank set aside N123.4 billion to account for the restructuring.

The Lagos-based lender doesn’t plan to expand credit by more than 5 percent in Ghana and will limit itself to treasury bills when it considers securities investments, Agbaje said.

“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.”

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Separately, Guaranty Trust predicts Nigeria’s next government will devalue the naira and work on converging multiple exchange rates in a bid to stimulate economic activity, according to Agbaje.

Ghana is restructuring most of its public debt, estimated at 576 billion cedis ($49 billion), and that’s soured the outlook for Guaranty Trust in its second-largest market. The West African nation exchanged 87.8 billion cedis of notes that paid an average of 19 percent, with bonds returning as little as 8.35 percent, resulting in losses for financial institutions. Authorities are still negotiating with many overseas creditors.

“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, referring to the inflation rate of 45 percent in West Africa’s second-largest economy.

Banks from across Africa and even the UK have been affected by Ghana’s debt restructuring. That, coupled with accelerating inflation and a weaker currency, has deterred companies in a nation that once used to lure investors.

(First published Bloomberg)

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