The banking industry, an increasingly competitive sector, has seen many banks perform exceptionally well in 2014. UT Bank has, however reported modest results for 2014.

One of the most prominent local banks, UT Bank, continued to issue loans to SMEs in its efforts to help them weather the unpredictable economic climate. At the same time, the Bank made the bold move to introduce a number of reforms which also contributed significantly to its performance.

Following the release of its 2014 audited financial results, UT Bank has posted a 24 per cent increase in profit before tax to GH¢16.7 million.

The bank demonstrated resilience in the face of a challenging macroeconomic environment which had a particular impact on the SME sector, the Bank’s core client base. It successfully grew its interest income by 20 per cent, largely due to increases in loans and advances.

Growth in non-funded income also remained strong, rising by 35 per cent year-on-year on the back of increased trade transactions and an expansion of the forex product offering. On the other hand, the rise in Treasury Bill rates negatively affected the Bank’s cost of funds, causing interest expense to rise by 33 per cent year-on-year, despite an improvement in the funding mix.

The organisational restructuring programme, undertaken in 2014, was a key contributor to the rise in operating expenses.

The programme, aimed at better structuring the Bank’s business model for the next stage of growth, involved a redesign of the model into two main categories, namely Corporate Banking and Retail Banking; a re-alignment of job functions to cater to specific economic sub-sectors and niche markets; and a development of specific product offerings aimed at addressing the growing complexity of consumers’ financial needs.

This required the bank to hire additional staff as well as investing even more in training and resourcing.

Exposures to hard hit sectors of the economy, such as the oil, construction and agriculture sectors adversely affected the bank’s asset quality, and resulted in a rise in non-performing loans. Profit after tax grew 21 per cent year-on-year to GH¢ 11million.

The bank also posted a 31 per cent year-on-year growth in loans and advances to customers, in part due a 15 per cent increase in loans disbursed and partly due to FX translations as a result of the depreciation of the Cedi against the U.S. dollar.

Total assets grew at a slower pace due to a decrease in investment securities as UT Bank exited some medium term investments and disposed of some fixed assets.

Total deposits increased by 5 per cent year-on-year following a conscious effort to reduce expensive deposits while growing cheap funds. The ratio of cheap to expensive deposits therefore increased from 31 per cent to 38 per cent.

UT Bank improved its return on average equity, in line with the prior year return on average assets and cost-to-income ratio.

Commenting on the results, CEO of UT Bank, Prince Kofi Amoabeng spoke about the bank’s resolute commitment to serve the SME sector in spite of the unpredictable interest rates and a general economic instability.

He explained, “UT Bank has remained particularly focused on its objective to support the SME sector. This is the reason for our being and our area of expertise. The bank remains focused on this goal and is putting systems in place to enable us to withstand any economic shocks”.

He added that “the rising interest rates on Treasury Bills negatively impacted our cost of funds and eroded the benefits that should have been gleaned from the improvement in the CASA ratio from 31 per cent to 38 per cent.

The year 2014 was also a year of consolidation for the bank’s organisational change strategy.

“We were able to pull all the pieces of the puzzle together to create the organisational structure we need for the next phase of our business growth and this in itself came with its own challenges and business disruptions, which also affected our revenue growth.”

He said: “UT Bank remains committed to overcoming these challenges so we can go back to the days of posting high returns for our shareholders”.

On the way forward, he said that “Management has adopted a three pronged approach to recovery, focusing on asset quality, efficiency, and human capital.”

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