Guaranty Trust Holding Company (GTCO) is poised to eliminate a significant loan extended to the Aiteo Group, an oil and gas enterprise, while also implementing a robust strategy to recover the funds. This decision marks a pivotal shift in the bank’s approach to handling its troubled assets.
GTCO’s Managing Director/CEO, Segun Agbaje, disclosed during the bank’s recent investor earnings call that the troubled loan, which has been a persistent issue for several years, will be officially written off by the end of 2024. Despite numerous restructuring efforts aimed at alleviating the problem, the outcomes fell short of expectations, prompting GTCO to take decisive action.
The Aiteo loan, GTCO’s most substantial forbearance issue, has long been a source of concern. Despite multiple attempts to renegotiate the terms to provide Aiteo with additional time, these measures proved ineffective. As the forbearance period approaches its end, GTCO has resolved not to extend further leniency. Agbaje emphasized that the write-off, while substantial, will not significantly impact the bank’s profit and loss statement.
GTCO has been forthright about the difficulties associated with the Aiteo loan. Agbaje expressed frustration with the lack of progress, stating, “It hasn’t gone the way we like, and I’m a bit tired of making excuses for it.” The bank’s strategy moving forward includes a rigorous recovery drive to mitigate any adverse effects from the loan.
Financially, GTCO is well-positioned to handle this write-off due to its substantial capital buffers. The bank has already provisioned over 50% of its capital reserves for Stage 2 loans, including the Aiteo loan, which will help absorb the associated losses without disrupting its financial stability. With its loan book totaling approximately N3 trillion, the Aiteo loan represents a significant portion of the non-performing loans, though the bank’s strong capital base ensures it can manage the impact.
The Aiteo Group’s financial and legal troubles are not new. Since 2014, the company has been involved in a series of legal disputes with its lenders, including GTCO, stemming from a $2 billion loan taken out to acquire Oil Mining Lease (OML) 29 from Shell Petroleum Development Company (SPDC). This loan, funded by a consortium of Nigerian banks and Shell, has faced numerous repayment challenges. Disputes over the loan have led to legal battles in both Nigeria and the United Kingdom, with recent rulings favoring the lenders and restraining Aiteo from pursuing further legal action in Nigeria.
In summary, GTCO’s decision to write off the Aiteo loan and pursue aggressive recovery strategies reflects a strategic shift in managing its troubled assets, underscoring the bank’s commitment to maintaining financial stability while addressing persistent challenges in its loan portfolio.
