Banking sector clean-up brought diminishing returns – Bright Simons

The Vice President of IMANI Africa, Bright Simons, has bemoaned the instability of Ghana’s banking sector in the past few years.

His comment was on the back of the losses recorded by the country’s largest bank, GCB Bank Limited.

The 2022 Audited financial statements of banks revealed that GCB Bank made losses of about GH¢568 million.

In a series of tweets on April 26, 2023, Bright Simons explained that despite the losses, bank deposits were on the rise.

“The health of Ghana's banking sector is on my mind as the country's largest bank by branches, GCB, posts dramatic losses for 2022. 568 million GHS. Negative cash flows from investment activities nearly hit a billion GHS. Etc. Luckily deposits are surging due to news insensitivity.

“All this got me musing about banking history in Ghana. The recent cleanup is of cos just the latest. In 1989, 41% of all bank loans went bad. Govt stepped in & issued bonds to buy the bad loans. NPART was set up to recover. By 1991, the recovery rate was an impressive 72%,” he said.

He further stated that banking sector clean-ups that have happened in recent times have not yielded the results that are expected. He recalls a certain businessman made profits to the tune of about GH¢129 as a result of mishappenings.

“More recent banking interventions have seen poor results. In 1997, the Founder of A-Life Supermarkets (now CEO of First Allied) hatched a scheme where he deposited cheques in Accra issued on accounts in the regions. Lack of networking led allowed him to cash 129bn cedis,” he said.

He added: “Even though the accounts on which the cheques were drawn didn't have the money. In the end, less than 20% was recovered from ALife. When govts changed the state forgot to pursue. The banking cleanup of 2018/2019 looks set to record less than 10% recovery. Diminishing returns.”

Meanwhile, the audited financial statements of banks have shown that 15 out of 21 banks recorded losses last year due to the Domestic Debt Exchange Programme (DDEP).

Ghana’s financial and economic climate has been troubled by various uncertainties in the last few years.

According to the 2022 Summary Financial Statements of some banks, the losses were due to the reduced coupon rates and the extension of the maturity period from five to fifteen years among others.

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The health of Ghana's banking sector on my mind as the country's largest bank by branches, GCB, posts dramatic losses for 2022. 568 million GHS. Negative cash flows from investment activities nearly hit a billion GHS. Etc. Luckily deposits are surging due to news insensitivity pic.twitter.com/NX4bUcvr9M

— Bright Simons (@BBSimons) April 26, 2023

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All this got me musing about banking history in Ghana. The recent cleanup is of cos just the latest. In 1989, 41% of all bank loans went bad. Govt stepped in & issued bonds to buy the bad loans. NPART was set up to recover. By 1991, recovery rate was an impressive 72%.

— Bright Simons (@BBSimons) April 26, 2023

SSD/MA