GTCO to write off Aiteo loan, pursue aggressive recovery strategy

Guaranty Trust Holding Company (GTCO) is preparing to write off a significant loan extended to Aiteo Group, an oil and gas firm, after several years of unsuccessful restructuring efforts.

The loan, GTCO’s largest forbearance issue, has posed a major challenge for the bank, with limited progress despite multiple attempts to renegotiate the terms.

During the bank’s 6-month investor earnings call, GTCO’s Managing Director and CEO, Segun Agbaje, confirmed that the loan would be written off by the end of 2024.

However, he emphasized that this move would not impact GTCO’s profit and loss statement due to substantial capital buffers already in place.

Agbaje acknowledged the frustrations surrounding the Aiteo loan, stating that despite restructuring, the loan has not performed as expected.

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He expressed the bank’s readiness to turn the page by removing the loan from its books and pursuing aggressive recovery measures to reclaim the funds.

The Aiteo loan stems from a 2014 financing arrangement in which Nigerian banks, including GTCO, funded 75 per cent of the $2 billion loan used by Aiteo to acquire Oil Mining Lease (OML) 29 from Shell Petroleum Development Company.

However, Aiteo has faced ongoing legal and operational challenges, leading to loan repayment delays and legal battles. GTCO and other lenders have sought legal redress through UK courts, where they secured a favorable ruling in 2022.

Despite the setbacks, GTCO’s strong capital buffers, with over 50 n provisioned for Stage 2 loans, ensure the bank is well-positioned to absorb the loss. GTCO’s loan book currently stands at N3 trillion, with Aiteo representing a significant portion of its non-performing loans.

Agbaje suggested that the impact of the Aiteo loan would be less pronounced if the loan book were closer to N7 trillion, but affirmed the bank’s confidence in its ability to handle the situation without a major financial hit

Agbaje stated, “We’ve put ourselves in a position to write off that loan this year, and it won’t affect our P&L.”

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GTCO has been transparent about the challenges it has faced with the Aiteo loan, with Agbaje expressing frustration at the lack of progress.

“It hasn’t gone the way we like, and I’m a bit tired of making excuses for it,” he said during the call, outlining the bank’s plans to move forward aggressively in recovering the funds.

“We’ll probably write off the Aiteo loan this year and then go aggressively on a recovery drive because we don’t like how it’s been playing out,” Agbaje stated.

GTCO’s loan book currently stands at around N3 trillion, with the Aiteo loan representing a substantial portion of its non-performing loan portfolio.

Agbaje emphasized that the size of the loan book, not necessarily the quality of the loans, contributed to the Aiteo loan being a larger percentage of the bank’s portfolio.

In April 2022, a UK high court ruled in favor of the lenders, including GTCO, granting them an anti-suit injunction that restrained Aiteo from pursuing legal action in Nigeria.