Business News of 2014-04-15

UT Bank to raise GH¢100m to boost capital

Management of UT Bank plans to seek authorisation from shareholders to raise a GH¢100 million to deepen its capital base.

The bank will first look at a rights issue before proposals for a private placement is considered.

The Chief Executive Officer of UT Bank, Capt Prince Kofi Amoabeng (retd), disclosed this in an interview on the sidelines of the regular Facts Behind the Figures session at the Ghana Stock Exchange (GSE) in Accra.

The bank, which has had a difficult 2013 due to the election petition in August and the slump in Ghana’s major export commodities, is not proposing any dividend payout for 2014.

Other factors that have hampered the bank’s growth include the sharp increases in utility prices and the consistent depreciation of the cedi against other currencies, which has led to a slowdown of the economy.

Capt Amoabeng did also not discount inflationary pressures and the high cost of borrowing and its effects on the bank.

UT Bank last year strengthened its capital base with a US$10 million senior loan from Amethia Finance to boost its capital base. The bank also received US$30 million medium term debt from responsAbility and the African Development Bank (AfDB) to grow its loan book and other activities.

The bank has also rolled out its “Bank on Wheels” product to mobilise deposits and recalibrates it as a ‘safe haven’ from ‘lender.’

This is because UT Bank has been faced with the challenge of deposit mobilisation as it is still branded as a lender, originating from its background as a non-bank financial institution that offered ‘quick loans’.

UT Bank has also been affected by changes in management strategy aimed at streamlining its business lines to focus on business banking, retail banking and corporate banking. Financial performance and strategy

UT Bank recorded a 19 per cent increase in total income to GH¢124 million in 2013, mainly supported by growth in its loan book portfolio. Although interest expense was high, on account of depositors demanding higher yields, the continuous focus on growing non-funded income boosted total income growth.

The establishment of four new branches and investment in technology to improve business intelligence and support new products and services (e-banking, VISA platform) led to a 34 per cent increase in operating expense.

Also, prudent provisioning by the bank to reflect delinquent loans resulted in high impairment charges; this Mr Amoabeng said affected profit for the year which declined to GH¢13.4 million but was upbeat that the bank would reverse the trend in 2014-15, as it focused on increasing returns from current asset base rather than growing its loan book.

According to the CEO, the banks’ performance reflected the real state of the economy. He added that UT Bank’s commitment to the SME sector, which was the hardest hit in the economic condition in the country, caused the bank to be negatively impacted.

The Deputy Managing Director of the bank, Mrs Pearl Esua-Mensah, stated that the bank was committed to undertaking strategic initiatives to drive customer deposits, reduce risks and increase profitability.

She said the bank would formally launch the Women’s Market, to position it as the bank of choice for women and women advocates in the country.

She said UT Bank would also improve its visibility by setting up five new branches and use “Agency Banking” to increase its footprints in the country.

The advent of e-products and services (e-banking, debit cards, etc) were also expected to increase the profitability of the bank by attracting high net worth individuals.

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