Banking remains an attractive venture in Ghana despite the raising of the minimum capital from GHS120 million to GHS400 million by the central bank, President of the Ghana Association of Bankers, Alhassan Andani has said.

“Banking still remains an attractive area of investments, returns on equity in banks, if you look at the total industry is … over 30%, not too many businesses give you that kind of return on equity and the shareholders know what they invested in,” the Stanbic Bank CEO told Moro Awudu on Class91.3FM’s Executive Breakfast Show on Thursday, 14 September.

Asked if he thought the local banks were in a position to meet the new minimum capital requirement, Mr Andani said: “You wouldn’t be able to straightaway say.”

“GHS120m from zero is a high number but people achieved it. GHS400m, if the outlook in terms of returns is attractive enough, shareholders might consider. I cannot say whether we would survive or we would not survive it, just suffice to say that it remains an attractive industry just that the entry barrier has been raised,” he noted.

According to him, how the various banks handle the GHS400 million issue will depend on their shareholders.

“It’s a shareholder conversation; all of us in management position while this conversation on what minimum level capital will be, certainly would have discussed with our various boards and, of course, our shareholders, so we have a year to get to that so people will be looking at various options and, of course, engaging the shareholders of the banks to see how we achieve that.”

Meanwhile, financial analyst Toma Imihere has said three local banks: uniBank, Fidelity Bank and Cal Bank, will definitely meet the GHS400 million new minimum capital requirement.

“The local banks that will certainly get there are uniBank, Fidelity Bank, Cal Bank, those ones, they don’t have any problem,” Mr Imihere told Moro Awudu on the same programme on Thursday.

Also, the Finder newspaper has said GCB Bank and to some extent ADB Bank are more likely than not, to meet the new requirement.

The Bank of Ghana has given all the 33 universal banks up the end of December 2018 to recapitalise from GHS120 million to GHS400 million.

According to Mr Imihere, most of the recently licensed local banks operating in Ghana will struggle to meet the GHS400 million minimum capital requirement and so would have to resort to the stock market, additional investment or mergers and acquisitions to stay afloat.

The recapitalisation is expected to shore up Ghana’s economy with GHS9 billion if all the banks are able to meet it.

Mr Imihere said virtually all the transnational banks operating in Ghana will easily fall on their parent groups to meet the requirement while a few local banks with good financial standing will also make it.

In his estimation, a lot of the causalities will be new local banks.

“First of all, we have somewhere between 10 and 12 banks that are already there – the GHS400 million – when you take out their shareholding funds, take out their statutory reserves and their credit risk reserves, when you take those ones out, either they are already above the GHS400 million or they are so close that all they need to do is just capitalise their profits for the 2017 financial year and they will get there.

“Now you have another nine that because of their foreign ownership, they belong to very big banking groups, banks like Société Générale that have the pedigree, the financial backing from their parents to get there,” he explained.

Mr Imihere, however, pointed out that: “… It is not compulsory that the parents will agree to put up the money. The parents are going to look at the returns they are getting and the returns they are expected to get if they put up the money. If they decide this child is worth it, they can afford to do it.

“What it means is that we still have about 12 to 15 banks or so whose situation is going to be up in the air. Unfortunately, most of them are relatively young local banks.”

For the banks that are unlikely to make it, Mr Imihere proposed a number of options.

“One is that they can go to the stock market. After two years of a depressed stock market – during the first half of this year, the GSE financial index rose by 15% – if you analyse that and assume that the trend will continue, this year you are talking about a 30% rise which, considering returns currently in Ghana, 30% is good returns but that’s an average. Of course it differs seriously from bank to bank but right now banking stocks put on the stock market are quite attractive. That is one option.

“Another option is to go look for new shareholders, especially these new banks whose shareholders have just put up GHS120 million, it’s going to be a tall order expecting them to go and bring another GHS280 million or so. Don’t forget these guys might have the money but they are also looking at how diversified their investment portfolios are; you don’t put all your eggs in one basket. … Of course you can go and look for other investors by private placement; there are still a lot of people who want to get into banking. … That is a shareholders issue.

“The last thing, of course, is mergers and acquisitions. I think that the BoG deliberately licensed several new local banks in order to give them the opportunity to merge to retain their local identity ahead of the deadline,” he said.


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