Foreign banks positioned to save subsidiaries in Ghana ... As positive financial results trickle in
Ghana’s banking sector is facing one of its worst times as the sector stares at unprecedented losses after the government restructured GH¢83billion (US$6.8billion) of local debt as part of a move to finalise a US$3billion bail-out from the International Monetary Fund.
Advertisement
According to the Bank of Ghana (BoG), developments in the banking sector are being broadly reflected by the challenging operating environment in 2022 on account of macroeconomic conditions and the recent implementation of the Domestic Debt Exchange Programme (DDEP) which all 23 universal banks participated in.
Based on December 2022 data, the central bank’s preliminary assessment of the DDEP’s impact on the banking sector, confirmed significant losses on account of impairment of banks’ holdings in Government of Ghana (GoG) bonds.
Although, the impact is been moderated by the introduction of some regulatory reliefs by the BoG as support similar to the reliefs provided to banks at the onset of the COVID-19 pandemic, the threats still lingers with some industry watchers fearing a number of developments thereof including fold-ups, forced mergers and or serious and heavy losses and in some instances, and drastic reduction in operational capital by close of the 2023 financial year.
It is feared that the worst to be hit in the melee may include local banks because of lack of capacity to raise funds to shore up their capital.
On the part of foreign subsidiary banks operating in the country, they are likely to be supported by their mother banks which have posted profits last year and will be willing to recapitalise their subsidiaries to enable them to stay in competition.
Positive financials
Some multinational banks with affiliates in Ghana have begun releasing their financials, announcing huge profits, a development which is positive for their subsidiaries.
For instance, United Bank for Africa (UBA) Plc posted a profit after tax of $378 million in the 2022 financial year, this represents a growth of 35.1 per cent compared to the $280.3 million recorded the year earlier.
Other Trending Stories
The development has pushed the group’s shareholder funds to $2 billion in the year under review, achieving an impressive growth of 5.3 per cent, compared to the prior year.
The bank consequently proposed a final dividend of 0.2 cents for every ordinary share of 0.11 cents, for the financial year under review.
The final dividend, which is subject to the ratification of the shareholders during the bank’s upcoming Annual General Meeting (AGM), will bring the total dividend for the year to 0.24 cents per share.
The bank paid an interim dividend of 0.04 cents based on its audited 2022 half year results.
In its audited financial results for the full year ended December 31, 2022, gross earnings rose significantly to $1.89million from $1.61million recorded at the end of the 2021 financial year and represents a strong growth of 22.2 per cent.
Zenith Bank Group posted a profit after tax of 223.9 billion Naira last year.
On the back of this, the Group demonstrated its commitment to shareholders, when it announced a proposed final dividend payout of 2.90 Naira per share bringing the total dividend to 3.20 Naira per share.
On the other hand, the Group impairments grew by 107 per cent from 59.9 billion Naira to 123.4 billion Naira, while interest expense grew by 63 per cent YoY from 106.8 billion Naira to 173.5 billion Naira respectively.
In spite of the development, the impairment growth, which also resulted in an increase in the cost of risk from 1.9 per cent in 2021 to 3.3 per cent in the current year, included the impact of Ghana’s sovereign debt restructuring programme.
This however, the Group said, did not heavily impact on the operations of the Ghana subsidiary as “Zenith Bank Ghana still maintains a substantial capital and liquidity buffer to continue to operate at its optimum best,” a development that reignites hope in its Ghana subsidiary which is yet to release its financials.
Way forward
The banking sector in Ghana is highly competitive. The foreign owned banks in particular are always ensuring they stay afloat to either maintain their market share or increase it. None also expects to lower its status in spite of the challenging economic environement.
The Standard Bank Group Ltd., Africa’s biggest lender by assets and the parent company of the Stanbic Bank last month announced that it was ready to re-capitalise its Ghanaian unit after making provisions to cover more than half of its holdings in the country’s debt.
Advertisement
The Chief Executive Officer of the bank, Sim Tshabalala, who announced this, said it might become necessary for the bank to inject capital in that business at the appropriate time.
The Standard Bank, thus, joined the FirstRand Ltd in accounting for the impairment and the UBA, with its present achievement, may not hesitate to do same.
The Graphic Business can confirm that the foreign subsidiaries are keenly watching developments and will step in when the need arises.