2019 to see well sanitized and resilient banking sector – Frank Adu

Ghana’s banking sector should be well-sanitised and more resilient as the central bank continues its reforms, Frank Adu Jnr., Managing Director of CalBank, has said as he called on the nation to back the regulator to clean up the sector.

“I think the system will be well-sanitised and become more resilient from next year onward. We should all basically support the central bank in what it is doing, and the important thing, hopefully, is that we learn lessons from it,” he said.

Mr. Adu was speaking to the B&FT in an interview after CalBank held an Extraordinary General Meeting (EGM) to allow shareholders pass a special resolution authorising the bank to transfer GH¢50million from its income surplus to stated capital to meet the regulator’s GH¢400million capital requirement.

“The best part is that this Governor [Dr. Ernest Addison] and his team are on a path of redemption and renewing confidence in the industry, and people can see that and it is working. Also, the Governor has said his own people were at fault. How often do you hear that in this country?”

Low confidence should be in BoG, not banks

Asked when he thinks confidence will bounce back in the banking sector, Mr. Adu noted that the subject of low confidence in the banks is misplaced because the collapsed banks did not issue licences to themselves but the regulator did so.

“People have to go a little deeper into why those seven banks collapsed. If you set up a bank with synthetic capital, which means it doesn’t have capital, it has already failed. No bank issues a licence to itself but the regulator. Even though the activities of the affected banks have damaged the image of the sector, supervision of those banks was an issue. So when it comes to confidence in the sector, it should affect everyone including the Central Bank,” he said.

CalBank meets stated capital

The bank’s shareholders approved the transfer of GH¢50million from income surplus to stated capital in fulfilment of Bank of Ghana’s GH¢400million minimum capital requirement. Mr. Adu expressed his delight to shareholders for giving the bank the required mandate to transfer the funds and enable it fulfil the new minimum stated capital requirement before 31st December 2018.

“We are especially proud to have achieved this without raising fresh equity, as our profit-driven strategy over the decades has enabled us accumulate healthy income surplus balances. We look forward to continuing our profitable operations as we enter our next three-year strategic period commencing in 2019,” he said.

The bank’s board chairman, Paarock Van-Percy, added that as at November 2018 the bank had recorded a profit after tax of GH¢157.5million as against the prior period amount of GH¢130.1million. “This was achieved through an improvement in operating income of 18.8 percent and a cost to income ratio of 42.2 percent.”

He noted that there were improvements in most revenue lines, coupled with prudent management of operating expenses and impairment charges recording a reduction of 1.6 percent compared with the previous year.

The bank’s total asset increased from GH¢4.2billion as at December 2017 to GH¢5.3billion as at November 2018, representing an increase of 26.2 percent. Investment in government securities and loans and advances increased by 26.3 percent and 23.3 percent respectively.

The bank’s shareholders’ equity at the end of November 2018 amounted to GH¢760.6million compared to the previous year’s figure of GH¢647.4million, an increase of 17.5 percent.

“Included in shareholders’ funds is an amount of GH¢166.5million, representing the income surplus balance at the end of November 2018, which is adequate to cater for the GH¢50million required to be transferred to stated capital to meet the minimum capital requirement,” he added.