GTBank: A different kind of Bank

In 2004, Nigeria had 89 commercial banks; by 2015, this number had reduced to 21 as many banks were forced to consolidate or shut down due to banking crises and poor results[1]^,[2]. In this environment, a few banks set themselves apart. GTBank was one of such banks showing strong organic growth while executing a low-cost customer-focused strategy[3]. This has made GTBank a top 3 Nigerian bank, despite being relatively newer than the competition.

GTBank distinguished itself by providing a superior but lower-cost customer experience. They introduced what they referred to as “Orange Rules”, a series of principles which emphasized service, professionalism and innovation[4]. More than an empty mission statement, this formed a part of new employee interviews and was communicated across the organization[5]. Then, they found innovative ways to bring this to life.

GTBank targeted young and middle-income customers who were seen as unprofitable by other banks[6]. They provided products to attract students and middle-income individuals such as zero balance savings accounts and cash back on cinema tickets. To get the message out, they sponsored several events at high school and undergraduate schools, providing instant bank accounts and bank cards – a novelty in a country where less than 40% of adults have access to formal banking services[7]. This ended up being a stroke of genius in two ways: First, a generation of Nigerians stayed with the bank as they transitioned from students to full-time jobs – a competitive advantage in a country with a median age of 18 years[8]. More importantly, it meant GTBank had the right customer base to implement the next pillar of their strategy: driving down cost by pushing customers to lower-cost banking services.

Because their customer base was young and more likely to embrace technology, they were able to serve them and drive down costs in Nigeria’s banking market – a predominantly branch-driven model. They set up electronic banking centers, ATM galleries and introduced other products to increase customer loyalty. This increased their retail customer base and deposits but more importantly, it freed up their banking halls making them attractive to corporate customers. Also, because of higher and cheaper deposits, they were able to offer better terms to corporate customers further increasing revenue.[9]

For the most part, the strategy has been successful. They have grown assets 13X since 2005 and have a market-leading cost to income ratio of 43%, 10% lower than the nearest competitor[10]; revenue per branch and revenue per FTE metrics are the highest across Nigeria’s banking industry.[11] Building on their middle-income customer base, they have become a key player in the affluent customer segment, for instance setting up premium lounges and customized services for high net-worth individuals[12]. However, with all the success, key questions remain.

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In recent years, GTBank has faced headwinds[13]. Service quality has suffered as the bank has grown – they dropped to 3rd position, after being rated the No. 1 retail bank in Nigeria for 4 of the previous 5 years.[14] Competition has intensified – Global banks have entered the market with deeper pockets for marketing and customer acquisition.[15] How will GTBank respond? Furthermore, as they expand to other African countries, it is unclear if the current branding or low-cost strategy will be as successful or if GTBank is willing and able to reinvent itself to compete in Mozambique, Kenya or Liberia[16].

Ultimately, GTBank has several decisions to make. Choosing the appropriate business model and a coherent operating model will determine the next phase of the bank’s evolution.

Endnotes

[1] Banking Supervision, Nigerian Central Bank, http://www.cenbank.org/Supervision/Inst-DM.asp, accessed 8 December 2015

[2] Aliyu S, 2010. The Nigerian banking industry reforms: Challenges and prospects. A paper presented at the conference on reformation in the banking industry: challenges and prospects: organized by Kaduna Polytechnic, Nigeria.

[3] Financial Intelligence, http://www.myfinancialintelligence.com/banking-and-finance/gtbank-setting-bars-others/2013-01-02, accessed 8 Dec 2015

[4] Our Brand, GTBank, http://gtbank.com/about-gtbank/our-brand/orange-rules, accessed 8 December 2015

[5] Nairaland, http://www.nairaland.com/87045/gtbank-interview, accessed 8 Dec 2015

[6] D. Adejuyigbe, Interviews

[7] Summary Report on Financial Inclusion, Central Bank of Nigeria, http://www.cenbank.org/Out/2012/publications/reports/dfd/CBN-Summary%20Report%20of-Financial%20Inclusion%20in%20Nigeria-final.pdf, accessed 8 December 2015

[8] The World Factbook, CIA, https://www.cia.gov/library/publications/the-world-factbook/geos/ni.html, accessed 8 Dec 2015

[9] D. Adejuyigbe, Interviews

[10] Investor Relations, GTBank, https://www.gtbank.com/images/documents/investors/GTBank%202014%20Group%20Financials.pdf, accessed 8 Dec 2015

[11] D. Adejuyigbe, Interviews

[12] D. Adejuyigbe, Interviews

[13] Leadership Newspaper, “GTBank’s Loan Book Stagnant, Deposits Shrink”, http://leadership.ng/business/470383/gtbanks-loan-book-stagnant-in-9-months-deposits-shrinks, accessed 8 Dec 2015

[14] KPMG Nigeria Banking Industry Customer Satisfaction Survey, http://www.kpmg.com/ng/en/pages/bankingindustrycustomersatisfactionsurvey.aspx, accessed 8 Dec 2015

[15] Saibu Olufemi, An Analysis of Competition and Market Structure In The Nigerian Banking Industry

[16] Ikem Okuhu, “Why GTBank cannot paint Africa Orange”, http://www.brandish.com.ng/why-gtbank-cannot-paint-africa-orange/, accessed 8 Dec 2015