HFC Bank records losses

HFC Bank Ghana Limited and its subsidiaries recorded a widening loss-after-tax and non-controlling interest of GH¢47.73 million for the 2016 financial year.

HFC Bank Ghana Limited and its subsidiaries also recorded an 18 percent rise in assets from GH¢1.6 billion to GH¢1.89 billion.

Deposits also increased by 31 percent, outperforming the industry average of 25 percent.

The loss position was driven by one-off expenses, changes in mortgage Non-Performing Loans (NPL) policy and Bulk Oil Distributors (BDCs) portfolio.

Prof Joshua Alabi, immediate past board chair of the bank announced this at the Annual General Meeting (AGM) on Thursday in Accra.

Dividend

As a result of the loss recorded for the year, the board of directors recommended no dividend payment until such a time when the bank can fully cover dividend payments from profit-after-tax.

Provisions

During the year, the bank wrote off loans totaling GH¢56.07 million.

The cumulative provision therefore stood at GH¢140.55 million as at December 2016.

The aggregate amount represents 60.91 percent of the non-performing loan portfolio.

In an attempt to adopt a more conservative approach to provisioning, GH¢72.78 million was charged for credit losses in 2016 compared to GH¢81.85 million charged in 2015.

Operating expense

Robert Le Hunte, Managing Director of HFC Bank Ghana, on his part, said operating expense for the period increased by 20.42 percent to GH¢192.60 million.

The major contributing factor to this was the number of projects the bank undertook to clean its books of legacy issues, together with one-off expenditure totaling GH¢20.49 million.

The one-off operating expense was incurred on a number of items, including the voluntary separation package, branch refurbishment and deposit campaign.

Liquidity position

The bank’s liquid asset to total asset ratio was 41.8 percent at the end of 2016 compared to 31.12 percent in December 2015.

Capital adequacy

HFC Bank ended the year with a capital adequacy ratio (CAR) of 11.50 percent, which is above the regulatory minimum level of 10 percent.

The suspension of interest on the non-performing loan portfolio and the current provisioning levels continues to adversely affect its CAR.

This is negatively affecting our single obligor limit, ability to increase our risk assets and by extension our loan portfolio.

Net interest income

The overall net interest income decreased by 8.26 percent to GH¢131.19 million.

The bank’s loans and advances (net) to customers increased by 3.20 percent from GH¢890.89 million to GH¢919.96 million, resulting in a marginal 2.53 percent increase in interest income.

The marginal interest income earnings from loans was due to the suspension of interest on a number of non-performing loans, totaling GH¢230.75 million as at December 2016.

New board chair

The bank now has a new board chair in the person of Charles Zwennes, a lawyer in private practice, who has been a member of the board of HFC since April 2015.