Good day, ladies and gentlemen, and welcome to the Guaranty Trust Holding Company Plc's half year 2022 investors and analysts conference call. All participants will be in listen only mode. There will be an opportunity to ask questions later during the conference. If you should need assistance during the call, please signal for an operator by pressing star and then zero. Please note that this call is being recorded. I'd now like to turn the conference over to Segun Agbaje. Please go ahead, sir. Thank you very much. Good afternoon. Thank you for joining. On the call with me today, I have Banji, who's our Group CFO. I have Miriam, who is the Managing Director of Guaranty Trust Bank. We've had the presentation up for at least 48 hours now, so we would like to take it that it's been read, and we would like to go straight into question and answers. I will be happy to answer those which I can. Where I need some help from Miriam and Banji, I will open up and push the question to them. Thank you very much for coming onto the call. Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star and then one on your touch tone phone or on the keypad on your screen. If you decide to withdraw the question, please press star and then two to remove yourself from the list. Again, if you would like to ask a question, please press star and then one. We will pause to see if we do have questions. The first question comes from Ronak Gadhia from EFG Hermes. Please proceed with your question, Ronak. Good afternoon. Thanks for the presentation and taking the time to answer our questions. First question is on your oil and gas book. Given the decline in production due to crude oil theft and whatnot, could you just talk about the asset quality of this portfolio? Specifically, could you just talk about the exposure to Aiteo, how it's been classified and if any provisions have been made on the same? The second question, I guess more from a macro perspective. Over the last, let's say four or five months, we've seen a bit of a U-turn in the regulatory environment. We've seen the central bank raise rates. T-bill rates have also been increasing. Could you just share some thoughts on where we are in terms of, you know, what's your reading about the regulatory environment, where we're headed, and, you know, how is the bank positioned in terms of growth and margins, within that context? The final question is on your payments subsidiary. I guess everything is in place now, the licenses, the approval of the whole core structure. Could we just talk about the strategic decisions that are being made in terms of, scaling up that business and what we should expect from that business in terms of revenue, profit contribution over the next, three-five years? Thank you. Thank you very much, Ronak. Please forgive me. I tend to spend a bit of time on the first set of questions so that if there are follow-up questions that you might have, and I answer them now, it'll make life a bit easier. In terms of the oil and gas book, I would say you're probably referring to our upstream oil and gas book. It's, you know, it's a mixed basket really. Like you said, there is oil theft, but there's also a higher oil price. Depending on when your, where your people are producing, we have some people who are shallow offshore, so absolutely nothing, their flows have gone up. If I look at the relative quality of the loan book, it remains the same. It remains very strong apart from Aiteo. Aiteo, which we've always told everybody, has a bit of a problem. From our perspective, we created some reserves against Aiteo. We have, I think, 10% or 15% in reserves for that loan. The more important thing is Aiteo will go through a restructure. I think the industry, it's a syndication, so we can't move a loan or move separately from the other banks in the syndicate. The idea is to put a restructure in place. I hope we are close to it. There are one or two things to take care of. The reality of Aiteo is if we do the restructure, production starts because the company's also building an alternative evacuation pipeline. With the reserves on ground, Aiteo should eventually turn out to be okay. Even though we've created some reserves, I'm not sure we will necessarily use them, but we will see. The truth about Aiteo or where Aiteo is that it is in the process of being restructured. We do have a slight reserve. There has been no production yet. If the alternative evacuation comes into place, it should work, and we should be looking at probably a restructure of at least eight years for this to work. That's the oil and gas part. Generally, in very good health. You're at about $90-$100 oil, so it's working well. In terms of macros, I think you're right. For me, the tailwind in the second half of the year for Guaranty Trust Bank Nigeria are the two things you said. One, interest rates are increasing. For most banks like ours, an interest rate increase is actually a tailwind because it gives you an opportunity to reprice your loan book. When you look at our cost of funds, even though it's gone up slightly from 0.7% to 1%, what you're gonna pick up in interest expense is gonna be a lot lower than what you pick up in the interest income side, even with what has happened to the savings rate. Really that should be a tailwind. I think we are in a rise in interest rate environment, inflation is over 20%, so we still have some headroom from 14% for APR. I would say second half of the year, you're looking at rise in interest rates. The second thing you're beginning to see is essentially gradual devaluation. I think we are now half year, we were somewhere around 419. I think right now the I&E is around 434-436. Again, based on the structure of the balance sheet of Guaranty Trust, devaluation is a tailwind because you will pick up revaluation gains on a long position of $1.2 billion. What do I see with interest rates increases? Exchange rate, I think you will still continue to see a devaluation. There is inflation. There's a lot happening in the world. I don't think the devaluation in Nigeria is anything unique at this point. Everywhere in the world you can see the currency is devaluing, apart from the U.S., where the dollar is stronger than everything else. When I look at what the macros are doing in terms of exchange rates and interest rates, I think it constitutes a tailwind for Guaranty Trust. The payment business. The payment business is taking off, Ronak, and just like we promised everybody, it took off on June first. We said we were going to create transparency around this business, and so you'll see that in our June results. You will see what we've done. We're P&L positive in terms of the payment business. The payment business is built really on three platforms. Our offline processing, which is where we talk about SquadPOS, which is basically a POS they use on a phone, which will allow us to go down market where most people cannot go. The second thing is our online acquiring, which is where you have virtual accounts and international payments. The third thing is what we call value-added services. Value-added services for us is just plain vanilla and will allow us to make money. Half year, I think the payment business running about a month or two made about NGN 300 million in profit. Which is why you can see that all the businesses are about 0.6 of group. We are very upbeat. Our first milestone that we will celebrate is 90,000 merchants. I think we're at about 20,000 merchants from June 1. Once we have that, we have some corporate sign-ons. We expect to see, honestly, 10x growth in this business monthly, and we hope we can pull that off for two-three years. For us, that's kind of what we see. We're very upbeat. We have a lot of work to do. The good thing from an investor standpoint is that we will show you exactly everything we're doing on a quarterly basis. I don't know if I've answered your question. No, that's perfectly. No, that's perfectly. No, that's very useful. I may have some follow-up, but I'll get back in the queue for that. Thank you. O-okay. Thank you. The next question comes from Muyiwa Oni from SBG Securities. Please proceed with your question, Muyiwa. Thank you, Segun, for taking the time, and just have a few questions. First is trying to unpack your swap position. In the presentation, you highlighted the NGN 613 million swap position. Wanted to understand the mix between sovereign and your corporate customers, and then also to know if you're in any swap positions with other sovereigns in your African business. The second question is trying to understand the drivers of your PBT contribution of the ex-Nigeria Africa business. It's higher than your expectation for half year. Just trying to understand how you are seeing level of contribution over the medium term as well. The third question I have for now is your. Within your fee income business, corporate fees came up, and corporate finance fees came up quite strong. Contribution is still low from a value perspective, but there's a high percentage growth. Just trying to understand what that income line is and the kind of outlook you have on that as well. Okay. Thank you very much, Muyiwa. Please, if I don't answer correctly, might be I missed some of it. Swap position. Our swap position is basically swaps with the Central Bank of Nigeria. It's about NGN 613 million. I believe that the swaps you're talking about is where we swap CBN forwards. We don't have a lot of that. I think we have NGN 70 million-NGN 90 million. When you look at our swap positions really with the Central Bank, we don't allow our subsidiaries outside Nigeria to do any more swaps. You will not find any swaps on their books. The swaps you see in the consolidated financials basically refer to Nigeria. In terms of business outside Nigeria, just like you said, it's 33% of group today. We expected it to be about 25%. I think 25% is a reasonable expectation. I don't believe that we will beat outside Nigeria 25%. The reason it's 33% today is that profit in Nigeria is slightly muted. The business is very strong. We're very happy with the fundamentals. Commissions and fees are up, interest income is up, trading income is up. The only thing that is slightly down is other income. If you take what we believe our prognosis is of exchange rates, then that's gonna kick in before the end of the year. I believe that by the time we get to the end of the year, they would come down to 25. Having said that, we are very happy with what's happening outside Nigeria. Businesses outside Nigeria, in terms of profit, are growing at about 35%. We're not taking a lot of risk, and if you look, the loan book is slightly down because we are controlling the risk. What we're making money off there, we're making money off trading income, we're making money off turnover, we're making money off interest income. We're not ballooning the loan book. It's a very controlled growth. We're not allowing them to do swaps. What we're doing as much as possible outside Nigeria is building scale in those businesses so the core banking business can continue to bring out a profit without importing a lot of risk onto the balance sheet. Thirty-three percent today, if Nigeria gets the tailwind, which we believe it will, it'll probably come back down to about 25%. Fee income. Muyiwa, I like your question. For me, the reason why you will never see our commissions and fees, I believe, as strong as a lot of our competitors, is that if you look at our loan book, our loan book is about 78% institutional, and those are people who resist fees a lot. However, we've been lucky, with one or two names where we've been able to structure a syndication, whether it's in the downstream sector or whether it's in telecoms where we've been able to get some corporate finance fees. They're not a lot of syndications at the moment, and they're probably not a lot we would go into. I don't expect that you would continue to see any massive increase in those kind of fees. That for as long as our loan book remains 78% institutional, then you're not gonna see any fantastic increase in terms of credit-related fees. I hope I answered your questions or if there's a gray area, I can take it. Thank you. Thank you. Muyiwa, do you have any further questions? No, I don't for now. Okay, thank you. Ladies and gentlemen, just another reminder, if you'd like to ask a question, please press star then one. If you'd like to ask a question, please press star then one. The next question comes from Damilola Olupona from Chapel Hill Denham. Please proceed with your question, Damilola. Good afternoon. Thank you very much for the presentation and congratulations on your results. I would just like to ask the following questions. I'll run through them briefly. First off, I noticed that the group appears to be performing below its NIM target of 8%. With what the CEO just said about expectation for rising interest rates, what would the bank be doing differently to achieve the NIM target, you know, of 8%? I also noticed that, I mean, the loan growth of 10% target, you know, for 2022, you know, I mean, the bank appears to have underperformed that. Also, should we scale our expectations for loan growth over the rest of the year? Is management still keen on achieving that target? Also, I noticed that the effective tax rate, you know, for the second quarter or for half year, you know, was somewhat higher, you know, compared to the previous years. Can you just get to the underlying drivers and if that will be the trend going forward? Just to provide some color, you know, on that front, and if you can also shed some light as well on what we should expect from contribution from your non-banking subsidiary. I know you had expected PAT growth of 2% on that front. Those will be my questions for now. Thanks. Okay. Thank you very much, Damilola. Let me start with the NIM. NIMs were 6.5, target was 8. Just like I said to Ronak, you have a tailwind in the second half of the year, so you will be able to make up some of that NIM gap. Interest rates are going up. You've seen even MPR, we're all looking at 200-300 basis points increase on the asset side. That if you're able to keep your cost of deposits under control, we should be able to bridge some of the gap. Will we get to eight? We'll have to see, but I definitely believe we can bridge some of the NIM gap. Loan growth. The 10% was for the entire group. We're at about 2%. We are very wary. What we've actually done is bring down the loan book of our subsidiaries outside Nigeria. The reason is very obvious. If you look at what is happening, inflation is very high. There's devaluation, which means there are some very, very strong headwinds. That if you grow a loan book in headwinds, you're going to pick up the NPLs in 2023. We would have been at the 10%. All the loan growth you basically see is in Nigeria. We're also being very careful in Nigeria because there are also very strong headwinds blowing. We will try. We never change our guidances. We will see if we can get to 10%, but we're not going to be obsessed with 10%. We're gonna make sure that we look at what the macros are telling us, and we're gonna see whether this is a conducive environment to continue to grow loans, both in Nigeria and outside Nigeria. Tax rate. I think for a lot of banks whose quality of earnings is strong, like ours, you will see that the tax rate, I don't want to mention another bank on the call, but I noticed that theirs was about 24% as well. Ours was 25%. The reason is very simple. There used to be a tax break on fixed income securities, government securities, that is now gone. You don't have that tax deductible anymore. So your interest income from your government securities are no longer tax deductible, so your tax rate will go up. That's why I said the quality of earnings of a bank becomes very important here. If you are making cash flow type profit, your tax rate must go up. Will it be at 25%? I hope not. We're gonna push both Banji and our auditors to make sure we're not paying more tax than we really need to, but we will pay the right amount of tax. I don't expect it to go above 25%, but I don't think you're gonna see it at 15% anymore, which is what it was this time last year. In terms of non-banking subsidiaries, I think we're on track. We're at 0.6%. We really started work on June the first. We will still strive for the 2%. You know, we've done 0.6 in a short period of time. 2% is a nice aspiration, I think, for our first year of operations. You must also remember that 2% is down to how well the bank in Nigeria does. If the bank in Nigeria hits a very strong tailwind, then we won't do it. But if the bank in Nigeria continues to move the way it is, we're hoping it will hit a very strong tailwind. Yeah, we're still at 2%. We're at 0.6 at half year. You know, we're reasonably happy with the progress. I hope I've answered your question, Damilola. Yes, you have. Thank you very much. Thank you. Damilola, do you have any further questions? I'll come back later, if I have any. Okay. Thank you, sir. The next question comes from Oluwaseun Arambada from FBNQuest. Please proceed with your question, Oluwaseun. All right. Good afternoon, and thank you for hosting this call. Congratulations on your results. Few questions really. The first one will be relating to your loan book. I mean, from your presentation, I can see that management took the decision to de-risk its FCY loan book, basically restructuring two obligors from FCY to local currency. I would appreciate if you could give us more details on what's happening on that front. Which sectors do we have these obligors? More details will help on that front. The second question would be on your asset yield. I mean, on the call you've talked about over and over how the interest rate environment is somewhat high. We can observe a slight drop, you know. I mean, it is very marginal in your assets yield. I mean, it was 8.1% in the corresponding period last year, but now we have it at 8%. I'm just curious, you know, given the interest rate environment, what can we expect going forward, you know? Could you just shed light on what happened there? Thank you. Thank you very much. Okay. Loan book to naira, just like I said, if you believe currency will devalue, and you have the ability to convert some loans, you will. I believe we did two, NNPC and WEMPCO. WEMPCO is a sticky loan, and so there's no point us holding it in dollars or watching a devaluation because a lot of it was import finance. We've converted it to a naira loan and given it some duration. The reason any other one, we're not just converting. We're converting the two that we believe, you know, have a probability of suffering from a devaluation, 'cause the cash flows are not strongly dollars. It was two, WEMPCO, NNPC, done. One was an IFF, which has turned out. The other was a term loan where a lot of the dividends that used to come in dollars are not coming in dollars anymore. In terms of asset yield, you're right, it's about 8%. Guess what, you must remember is that the climbing of interest rates just started, and that the results you're looking at are January to June. It's the second half of the year, you will kind of see a pickup. Interest rates have just only gone up about 20 basis points. Remember, even your intervention funding used to be at 5%. It's now at 9%. None of this happened in the first half of the year. It's in the second half of the year really that interest rates have started going up. I am hoping that, but because we want to run for a whole year, that at the very minimum, we should hopefully be able to see 100 basis points pickup on the asset yield side. If we do that, it'll take our NIM closer to the target at 8%. I guess the simple answer to your question is, it was flat in the first half of the year, but interest rate pickups only started in the second half of the year. All right. Thank you so much. Oluwaseun, do you have any further questions or is that it, sir? Should I have questions, I will come back. Okay. Thank you very much. Ladies and gentlemen, just another reminder, if you'd like to ask a question, please press star then one. If you'd like to ask a question, please press star then one. The next question comes from Sodiq Safiriyu from Meristem Securities Limited. Please proceed with your question, Sodiq. Good afternoon. My first question would be that it's on the fees and commission expenses of the bank. There was a jump in the fees and commission expense. I don't know if you can run us through, you know, just share your thought and insight on what actually caused this jump. Also, I would love to know, you know, what your expectation is. On the HabariPay, the integration of HabariPay into the holding company. What is your expectation for it for the remainder of the year? Thank you very much. Okay, thank you very much. Commissions and fees expense, you're right. There has been a jump from about NGN 1.something billion to about NGN 8 billion. As your activity increases, if you look at mobile banking, it's gone up 55%. Means your card transactions have gone up. If you look in detail, you'll see that we've paid NIBSS a lot more money than we ever used to pay them for interchange and switching. Really it is volume tied. As our volumes are going up, so are our expenses, whether it's NIP, whether it's NEFT, so it's volume related. Yes, it is going up because of that. Habari, you know, like I said to you, Habari today is about 0.3, 0.4 group because it's slightly over half of the 0.6. I think if we get HabariPay to 1% by the end of this year of gross, that'd be a nice target for HabariPay for this year. All right. Thank you very much. Thank you. The next question comes from Timothy Wambu from Absa. Please proceed with your question, sir. Yeah. Thank you very much, Segun. Thank you for taking time to answer our questions. Just a couple of questions from my end. The first one is on when I look at your fixed income gains, not as robust as some of your peers, up only 30%. We've seen some more than double. Maybe just give us some thoughts on that. Second question is related to the MPR hikes that have been seen so far. I just want to understand, do banks have a free hand to pass through these hikes to the consumers? Or is there still some constraint from the loan-to-funds ratio? Then the last question is on I can see Ghana, your second-biggest market. I can see your PBT grew by 20%. I see your loan book contracted by quite some margin. Should we be concerned given the tough macros there? Should we expect a reversal? You know, just from that, I saw that Nigeria's earnings declined PBT wise. Could you just pinpoint exactly why that happened? Thank you. Okay. Sorry, let me start from the bottom, and then I'll go to the top, and then I'll give you my layman's answer to your first question, or Banji might give you the more technical one. Just like you said, we have consciously brought down the loan book in Ghana because of the level of devaluation and inflation we're seeing. We're making a lot of our money. Why shouldn't we? If you're able to grow your deposit base, you don't need to grow your loan book at fixed income rates of 27%-29%. We're gonna play a game that is only rational, which is to grow our deposit base and put it in fixed income. No, we don't expect income in Ghana to drop. For as long as we're not being that aggressive on the loan book, we don't think we'll have anything go wrong going forward. We can always just reclassify where we're putting in money in terms of assets, and we'll replace what we're putting in loans, and we'll take it into fixed income. In terms of Nigeria's actually improved quarter-over-quarter. Yes, Nigeria, the Bank Nigeria is about 5% down on last year, but that's the best we've been, and that was a half year. The banks in Nigeria will clearly definitely catch up and exceed last year because just like I've said during the call, you're in a rising interest rate environment, which for the Bank Nigeria is a tailwind. Every devaluation is a tailwind. So 5% down for the Bank Nigeria is fine. We might have been concerned at the end of the first quarter. We're totally not concerned anymore. We're sure the Bank Nigeria will beat 2021. MPR hikes, you can pass it on. You can pass the entire thing on. You can pass higher than that. For some reason, the banks have been very wary and very careful about passing on rate hikes. I don't know why. It doesn't make a lot of sense to me because when you look at the environment where we're in, I think your interest rate hikes on your loans should be at least equal to what MPR is doing. They're actually. The easy question is that there are no restrictions. In terms of fixed income gains, honestly, I don't have the technical answer. It might have something to do with the yields that other banks have on their swaps. It might have something to do with the volume of swaps you have. We have 600. Some of the banks you're talking about might have swaps of NGN 1.8 billion. Some of them have NGN 2 billion. If you take what the swap bills are doing, your gains on your fixed income portfolio will then be higher than someone who has 600. I don't know if I've made sense or you want Banji to give you a bit deeper technical answer. I don't know whether Banji wants to give it a go as well. Is it, because I get a sense that are these purely swaps or is it actually your fixed income holdings or your treasury securities? Maybe just clarify on that. Okay. Let me just jump in. Yeah. Okay. Thank you very much. Okay. When you look at the gains you're looking at is a combination of swaps and mark-to-market gains on treasuries. Standards permit you to do effective interest rate. Where you choose not to do that on your fair value through P&L financial instruments, then you are permitted to use any form of rates depending on your valuation methodology. What you see with other banks, which we don't do in Guaranty Trust Bank, because this is one-off gains which reverse in subsequent period. If you choose not to do amortization of your UID, which is your unearned interest and discounts following what standard prescribed for your financial instruments which you are going to fair value through P&L, then you can do valuations. Which is why you see humongous trading gains on the book of other banks. In Guaranty Trust, what we do is to do effective interest rate computations, which is why you don't see volatility in our earnings on that line. The other aspect is the swaps which the Group CEO have alluded to. Depend on your forward rates which you are using, or you might choose not to reverse all those gains. You might delay them till maturity, depending on the methodology which you have adopted. That will also determine the level of gains you book on your books. For us, what we try to do is to be conservative as far as we can so as not to have gains which we know in no distant time will reverse at point of maturity. That's what we've done in GTCO financial statement. That's why you see modest gains on our book compared with what our peers are doing. It's just basically differences between how we approach valuations and our fixed income securities or derivative positions which we are keeping. Thank you, Banji. Timothy, I hope that kind of clarified that as well as the other questions you asked. Yes, it does. But maybe just a quick comeback is, I mean, why not do so and boost your bottom line numbers? Okay, I fully understand, you know, the rationale as, you know, you're cautious on revaluing the portfolio, but I mean, if you look at the bottom line performance, and I say that relative to your competitors, is that something that is not high on your priority maybe, just to wrap up with my question? Okay. Let me tell you, Timothy, that's the kind of question for us. Honestly, we don't believe in profits that will reverse. We believe in constant growth, and that whatever we give to you, we can guarantee. Even with that, we don't think our performance is shabby. We're up 11%, NGN 103 billion without conservative accounting of our fixed income and our valuations. Of course, we care about maximizing shareholder value, but we also don't wanna give you value today and then reverse it tomorrow. We would rather give you 23.99% ROE today and be able to give you 27% next year. We don't wanna give you 27% this year and give you 18% another year. We'd like to be consistent. I think that's what we are. We are consistent. We're not gonna just blow the bottom line and worry about tomorrow another day. That's not how we operate. Great. Thanks much. Appreciate today. Thank you. Thank you. The next question comes from Ngozi Odum from CardinalStone. Please proceed with your question, Ngozi. Thank you very much. I just wanted to ask, in terms of your NPL, what's driving that percentage points increase we're seeing in your NPL ratio on individual loans? Okay. Well, total NPLs haven't really grown. They've flattened about 6.1%-6.2%. I wouldn't say they've really grown. You will have some deterioration in your retail loans, but again, the book is growing. As the book grows, the percentage of it that goes bad also grows. Just like I was explaining in a meeting one day, we're very happy with our retail loans. If we took a five-year perspective on how much we've made from retail lending, I don't believe we've even thrown away one year of earnings. Yeah. We don't see any real marked growth. 6% NPL, we'd like to be at about 5%. We think we'll get there. No worries about the retail loan book. Whatever NPLs we're picking up, the profit more than compensates for. Ngozi, do you have any further questions? No, thank you. Thank you so much, ma'am. The next question comes from Josh Arowolo from Stanbic. Please proceed with your question, Josh. Hello, Josh, are you still on the line? Yes, I am. Can you confirm if you can hear me? Yes, we can. If you don't mind speaking up a little bit. Okay, sure. Is this better now? Much better. All right. Thank you. And thanks for answering or, you know, taking my question. Just following on what Timothy was speaking to, reading some of the analyst reports and commentary for the H1, 2022 release, I think there seems to be, you know, a growing view that the group needs to boost income lines a bit, you know, particularly considering the challenging environment that the group operates in. Given what you've said today, it doesn't seem like, you know, like you said, just going all out and growing loan books aggressively is gonna be the way forward. My question is really, is the management concerned about sort of how investors are viewing PAT growth, which has been a bit choppy over the last couple of years? Look, management is never concerned about short-term. Of course, we're very concerned about our investors and our shareholders, but just like I said, I mean, I really don't think I think if you look at the environment and what we're doing, I think we're fine. I think if you're printing a pre-tax ROE of about 24%, you are in a good place. That if your profit on the type of base we have is growing at 11%, you're fine. You have our subsidiaries outside Nigeria doing NGN 30-something billion at the moment. That's 35% increase. We know the headwinds in banks in Nigeria. We're not gonna play the game of valuations because it will reverse. In terms of returns, I think we're doing what we need to do. Maybe people are not reading the financials properly. There's probably another problem. People are not paying attention to the quality of earnings. A good way to know what the quality of earnings is to look at the tax rate. If you're paying a tax rate today of 14% on your income, it means that you're not making cash flow type profit, is why you could be paying 14%. If you're paying the right type of profit, you'll be making 23, 24, 25%. Rather than looking at absolute profitability, I think people should be looking at what the quality of earnings are, what type of dividends you can pay from it, and the ability for those profits to reverse. Where we are, we think our quality is better than. We think our profit is very consistent, our returns are very consistent, and that in terms of quality in this environment today, this is the best. I hope that answers your question, Josh. We're not short-term. We don't believe in short term. We're very long term in whatever perspective we take about our business. Josh, do you have any further questions? Yes, please. You may proceed. Yeah. Sure. Can we get a view on how management expects asset management business and the pension business to evolve sort of in the medium term, and when, you know, management believes that there'll be significant value added to the bottom line from those businesses? Look, in three years they'll be very significant. I mean, these are public figures which I'm giving you because I think we bought our asset management company at the end of February. We kind of started real work in June after strategic plan. Pre-acquisition was NGN 27 billion. Funds under management were NGN 74 billion today. If you're growing at that kind of rate, which we believe we will, we've just started work, in about three years it will be pretty meaningful. I believe by the end of the third quarter we will, in terms of fund management business, be in the top 5, top 4. Pension, we might grow a little more slowly because RSAs are kind of transferred a bit slowly, but we think we have what it takes. We have the customer base to cross-sell to. 0.6 in about such a short space of time in terms of contribution of a profit of NGN 103 billion is decent, which means they're making NGN 700 million now. In about three years, I think you will start to see the meaningful growth. Josh, the more important thing for me at least, and for us, is that none of those franchises are making a loss. They're all P&L positive. There's been absolutely no drag to the group P&L. I'll say give those two franchises three years and then we'll be able to evaluate how strong they've become. All right. Thank you. Thank you. Thank you. The next question is a follow-up question from Ronak Gadhia from EFG Hermes. Please proceed with your question, Ronak. Thank you. Three more follow-up questions. Firstly, Basel III. What's your capital efficiency ratio under Basel III, and when do you expect to fully migrate to Basel III? Second question, you know, we've discussed a lot about swaps. I'm a bit surprised by that, I think because on the previous when we've had previous discussions, management have indicated that they're reluctant to get into this type of structures with the CBN. Has that view changed, and if so, you know, what has really changed? The third question is on your e-banking income, digital volumes. There's a bit of a disconnect between your volume growth and growth in e-banking revenue. Volume growth, as we can still see, it still remains very strong, but the growth in actual revenue was quite modest. Could you just talk about, you know, the disconnect there? Also sort of related to that, what's the, you know, initial impact of MTN's PSB license being within that space? Thank you. Okay, I'll take the first one. I'll let Banji talk about Basel III. E-banking income, I wouldn't say there's a disconnect. As your volumes grow, it depends what's growing. Don't forget, a lot of the money you make might be NIP, and if the volumes are growing, like I think it's under, is it 10,000 or 5,000, you pay NGN 10. People have learnt there's behavior where people know where the fees you attract are smaller. Group is still about NGN 10 billion. You will have some volume growth and a lot of volume growth. Mobile bank is like 55%, but it depends the type of volumes and the type of amounts people are pushing through at any point in time. No, we haven't really seen anything from MTN's PSB. I honestly believe that the Nigerian banks are better equipped to deal with mobile telecommunications threats than other countries. I'm not sure there's a country that had a NIP when mobile money started there. NIP's instant, and that gives you a bit of an advantage. There are also other things that are happening today where people are beginning to switch licenses. Switching licenses will make the banks a lot more competitive. While we haven't seen any PSB threat, I really do not believe the banks will not be able to withstand that threat. I think they will adequately. No, we've not suddenly become lovers of swaps. We have been carrying this for a while, and if you check our books over the last two years, you will notice that it hasn't grown. No, we're not suddenly going into swaps. We still have a very conservative stance about it, and that's why the volume has remained the same. I will have Banji discuss Basel III and what the capital increases will be under Basel III. Thank you, GCEO. Under Basel III, the only change you're going to see is that we need to make additional charge of 0.5%, or we call capital conservation buffer. Which implies during normal situation, Basel III requires you to charge additional 0.5%. In terms of if there's stress or systemic risk or volatility in the environment, Basel III also requires us to charge up to 2.5%, which we call countercyclical capital buffer. If you add the two together, 2.5% plus 0.5%, you have 3%. Currently, our capital is so strong at 3.5%. If Basel III was to kick off today in Nigeria, our capital will be 20%. We sustain our CAR to reserves and Tier 1s, which we're also expecting. We do not expect our capital to fall below 20%, in spite of whatever challenges or credit risk which might pick up in the environment. As we speak today, we are in good position to report under Basel III. If you are to report the current capital position in Basel III, we'll be reporting 20%. Under Basel II, we've reported 23.5%. That's the position. Thank you. I think part of the advantage we have, Ronak, is that if you look, practically all our capital is Tier 1. It kind of insulates us a lot of the stuff or the headwinds that might come from Basel III. Understood. Very quick follow-up on the digital volumes, digital bank. Do you offhand have information on what the take rate or commission rate that is on each of those channels and how that has evolved on a year-on-year basis? God, I don't have it off the top of my head, but like I explained, it's tiered, you see. Because of the whole push of financial inclusion, I think under 5,000 is NGN 10. I think between 5,000 and 25,000 is something like NGN 25. Banji, help me. Or Miriam. Let Miriam help me. I think Miriam has the answer to this. Miriam, what's the tiering on NIP? Hello? Okay. Hello. Yeah. You're correct. We have under NGN 5,000, we have NGN 5,000-NGN 50,000, and then we have above NGN 50,000. 50,000. Below five. Sorry? Yeah, go on. Below 5,000, 5,000 to 50,000 and then above 50,000. Below 5,000 is NGN 10. That's where the bulk of the charges come from. Yeah. Ronak, that's the thing, though. Customers have learned that. What you find is most people are transacting and moving their monies, their P2P is being done under NGN 5,000. Even though your volumes are growing, they're growing at the part where the commissions are the lowest. Understood. Is the game here really just to continue scaling up your customer base, try and get them to do more transactions, and then eventually introduce more digital products? Oh, yes. You have to anyway. Not really monetize the payment side? You see, by virtue of the way life is going and customer experience anyway, I'm not sure you have a choice. Even if you look at your competition, you have FinTech as competition today. You have, just like you pointed out, you have telecoms companies. You have to continue to enhance your digital platform. You have to continue to enhance your e-channels, irrespective of whether you're charging the maximum for it. As long as you're not making a loss, there's marginal revenue, but it has to be built into your business model. It's also in recognition of that we also built HabariPay. Between the bank and HabariPay, we are hoping that the customer experience we will deliver in terms of digital experience will be unrivaled. No matter whether all the customers move on to 5,000, we must continue to invest in that channel because that is what customers are demanding today of banks. Thank you very much. The next question comes from Damilola Olupona from Chapel Hill Denham. Please proceed with your question. Thank you very much for the opportunity again. I would just like to ask some follow-up questions. I mean, you had mentioned the impressive feat, you know, you've been able to achieve in the newly acquired insurance business. But then I'm just, I'm a bit concerned about growth and the competitiveness in that space, especially given the fact that PenCom hasn't issued new licenses. So is the bank looking to, I don't know, maybe acquire another player anytime soon? Or how do you intend to remain competitive in that space? That's my first question. Then secondly, I would just like you to comment on the size of Nigerian e-banking space and, as a bank, how much of your e-banking revenues, you know, come from the rest of Africa business? Just looking at your HabariPay, I mean, similar to other FinTech players, are you also looking to tap the international market to raise funds? Is that something you have in the offing? Lastly, I was just looking at the deposit growth vis-à-vis the investment securities growth and the loan growth as well. I mean, I just hope you share your strategy on how you intend to deploy bulk of the deposits, you know, you've been able to source, especially given the fact that your loan growth and your investment securities still appears to be growing slower than the deposit growth. Those are my questions for now. Thanks. Okay, let me start from the bottom one because I didn't have time to write it down. How are we going to deploy our deposits? First, you're looking on a group basis. Honestly, the different countries and different territories will handle that very differently. Deposit growth in Nigeria, you will put into quality loans. Deposit growth outside Nigeria, most of the other subsidiaries you'll put in fixed income securities because the yields are so high. If you're going to Ghana, you're at 27%. If you're going to other environments, yields are going up. So it'll be a two-pronged strategy. Nigeria will be loan growth. Outside Nigeria will be fixed income securities if we're able to grow that. HabariPay, you know, I'm not sure they're raising equity. I've got to be honest with you. My sincere belief is that strategy is dead. There was a time where you could start a payment company or a fintech and just do volumes and hope to grow from equity because there was so much equity in the world. Under this current environment, I don't think there's a lot of money looking for equity investments. I think the fintechs are gonna have to do a couple of things. You're going to have a business model that makes you money, which means you can't be making losses. If you've raised equity, you'll have to deploy it more efficiently. I don't think the days of making losses and just raising equity are gone. I think the world is looking very different. We don't feel any need to raise any equity in the short term. I think we're well capitalized, and I think we're making enough money. On your comment on PFA growth, by the way, non-issuance of licenses is actually an advantage to the existing players because it means you don't have newer and newer competition coming in. Anytime new licenses are not being issued, everybody who's in an industry who's well capitalized tends to grow. That's what you saw in banking in 2004 during consolidation. Yes. However, the place you're right is that we are still quite small, but we're not gonna rush to do any acquisitions. I think initially we're gonna see how much we can grow by cross-selling to our existing customer base. If and when we get to a point where we think we need to do an acquisition, we can do it. We have over NGN 11 billion capital. That capital is based in cash, which means that on its own steam, that PFA is capable of doing all of our acquisitions, but that's not gonna be our immediate target. Our immediate target is gonna be to grow organically and cross-sell. When we get to a point where if and when we think we need an acquisition, we'll do it. I think you spoke about e-banking income. Sorry, I don't have the exact figure, but just like I had explained to Ronak, it's growing. It's growing by virtual necessity anyway because we rely on it in our customer experience. I don't know if you were referring to the PBT for outside Nigeria, but contribution of PBT of subsidiaries outside Nigeria to group today is 33%. Damilola, does that answer all your questions? Yes. The next question comes from Sahil Kumar from Moon Capital Management. Please proceed with your question, Sahil. Hello. Hi, can you hear me? Yes, we can. Thank you. I have two. Sorry, you're breaking. Right now. Okay. Hello? Start again, please? You were breaking. Okay. Yes. Thank you. My question is basically, I mean, we are. Unfortunately we just lost Sahil's line. We're going to move on to the next question. The next question comes from Abdulrauf Bello from WSTC. Please proceed with your question. Yeah. Good afternoon. Yes. My question is on the group's Special Bills. The amount of Special Bills on the group's balance sheet. I would like to get a sense of what to expect on that line going forward, especially as interest rates are rising. Do we expect to see a very quick and sharp redeployment so as to boost your interest income? What is the group doing? What is the management doing in regards to the significant Special Bills? Unfortunately, it's not within our control. If you talk to any bank, Special Bills, you don't ask for them, they're given to you. We're sitting on about NGN 560 billion now. We would love for it to be zero. Sorry, unfortunately, I can't tell you what it'll be in the future. Will it be less? Will it be more? Special Bills are basically allocated to you. It's not stuff that we go out and buy ourselves. It is bills that are allocated to us by the regulator, so I can't give you any color on what it would be like in the future. We're in the dark too. Whatever it is, we'll get to know when we're allocated or not allocated. Definitely, this wouldn't be how we would choose to deploy our resources. We wouldn't be going into assets that yield 0.5% or 0.3%. All right. Thank you. Thank you. The next question is a follow-up question from Ngozi Odum from CardinalStone. Please proceed with your question. Thank you for giving me the opportunity to come back. I wanted to ask, given your cautious stance in terms of loan growth, do you think that given the expected increase in the yield environment, do you think it's going to impact your ability to generate more interest income? I mean, about 60% of your earning assets, interest earning assets are largely loans. Do you think it will impact your ability to garner more interest income, or how are you thinking about that? Okay. Like I said, I don't think it's going to impact it, 'cause I think we're going to attack our interest income growth from two sides. Just like I said, Nigeria will attack it from the loan growth perspective because we think we can manage that. Outside of Nigeria, there's plenty of opportunity to go into fixed income securities 'cause the yields are very high. No, I don't think our conservative approach to loan growth, which we really have outside Nigeria, is going to impact what happens to interest income. Because we will just go from loans to fixed income, and interest income will be the same. In Nigeria, we'll take opportunities and grow the loan book. No, I don't think it's going to impact our stance is going to impact our interest income growth at all. I think we'll attack it in the two ways. It'll be a two-pronged approach. Next question is from Sahil Kumar from Moon Capital. Please proceed with your question, Sahil. Okay. Welcome back, Sahil. Hello. Yeah. Can you hear me properly? Yes, we can. Okay, great. My question is basically, we are heading towards elections in coming months, and like CRR regime and the FX regime, there has to have some kind of normalization at some point. I mean, the initial discussion, if you have any with the candidates, the feedback you are getting from those candidates and how they are gonna proceed once they come into the power. Is there any view that you want to share? Look, Sahil, let me be honest. I think it's too early to know what the monetary policy and fiscal policy of any of the new candidates will be. The one thing I will say to you is I believe we'll have safe elections. I think we will land this correctly. I don't think the political risk is high. In terms of what the monetary policy and fiscal policy will be, I think it's early days, and so we'll have to wait and see. I think they're going to campaign in about a week or two, and as they hit the road, maybe we'll start to get snippets of what their monetary policy and fiscal policies will look like. Understood. One more question from my side. I know someone, my line was not clear, but I mean, the incremental deposits that you are getting, how are you utilizing those funds? Because currently because of the elections, you won't be interested to grow your loan book aggressively. I keep losing Sahil. Unfortunately, sir, we have just lost Sahil's line completely. Yeah, all right. Okay. So- I think we've given him two chances. Okay. We are going to move over to the final question, which is a follow-up question from Oluwaseun from FBNQuest. Please proceed with your question, sir. All right, thank you so much for the second opportunity. Okay, so my question this time would be on the payment side of the business. I understand that HabariPay, you know, aims to be like a one-stop shop, you know, for different services. I would also want to know, as a group, do you have probably related parties, you know, that also play within the payments ecosystem, probably are positioned, you know, on some other level within the payments ecosystem, and are you also looking to grow that side of the business inorganically? Look, sorry, I don't know who this is trying to call me. Sorry, go on. Sorry, it's just the background noise. No, we are basically going to grow our payments business through HabariPay. HabariPay has all the cocktail of licenses that we need, and we believe that it will do what it needs to do. On the question on related parties. Any related parties. No, no. Sorry, there's just someone trying to distract me. HabariPay belongs 100% to GTCO, and it has all the licenses that we really want to do, which is basically online acquiring, offline acquiring. That's our core business. We're not, for now, going to do anything else, but that same license allows us to be a switch, allows us to go for a PSB license. No related parties. 100% owned by GTCO, and that's the vehicle what we use for our foray into payments and diversification outside what the bank does. All right. Thank you so much. Thank you. Thank you very much. At this time, I would like to hand the call back to Mr. Agbaje for closing remarks. Thank you, sir. Thank you very much, ladies and gentlemen. That was our half year call. That's kind of our story. Like I said, we're pretty upbeat. I think we've kind of arrived where we need to be. Steady growth. New businesses are doing well. Banks are under control. I, you know, I wish everybody the best, and we'll speak to you again probably around February 2023. Thank you very much. Thank you very much, sir. Ladies and gentlemen, that does conclude today's conference. Thank you very much for joining us. You may now disconnect your lines.