Merchant Bank is dying

Merchant Bank Ghana Limited is gasping for breath as the former vibrant bank struggles to stay afloat.

At the time banks are making first quarter fabulous profits, Merchant bank is on its knees begging for a bail out from the Bank of Ghana.

A source at the bank told DAILY GUIDE that the bank only exited on paper as its accounts were in red.

Even though the management and Board of the Bank are pretending that all is well, the fact of the matter is that the financial institution is on a life support, virtually relying on depositors’ funds.

Recent correspondence from management point to a bank in steep liquidity crisis.

Management is now operating the bank on customer deposits, which shows how grave the condition of the bank has been lately, information reaching DAILY GUIDE confirms.

While all other commercial banks in the country have proven equal to the GH¢60million minimum capital requirement directed by the Bank of Ghana, Merchant Bank has still not found its feet and is only grasping at deposits as its last straw for survival.

Financial Statement

Recently, the bank held its annual general meeting in Accra but it was without any financial statement or annual reports for shareholders to learn about what the current situation of the bank was.

But a letter from the bank, dated 27th February, 2013, and addressed to the Head of Banking Supervision, Bank of Ghana, which was copied to the Director General of SSNIT, the main shareholder and also the Chairperson of Merchant Bank Ghana Limited, stated: “The continuing losses arising from the Merbank Assets Recovery Trust (MART) has had a marked adverse impact on the bank. This matter must be holistically resolved to salvage the bank from its dire situation.”

The letter, signed by J.N.B. Tetteh, Managing Director of Merchant Bank, categorically stated that “Completely removing it from the books of the bank will provide the bank with the badly needed lifeline.”

He further revealed: “We have been in breach of the Capital Adequacy Ratio (CAR) for a long time now. Stakeholder confidence stands to be very badly affected if this matter cannot be addressed soon. Our infrastructural development has necessarily been on hold for a long time now as we endeavour to preserve the dwindling net worth of the bank.

Making reference to a recommendation in the Banking Supervision Department (BSD) review report last year, Mr Tetteh reiterated that the only solution to the challenges Merchant Bank faced was massive injection of fresh capital.

“You will recall the liquidity challenges we were confronted with last year. What would have been a very dire situation with its concomitant reverberations was taken care of when, thankfully, Bank of Ghana came to the bank’s rescue with a life line of credit.

“Correspondent bank lines are bound to suffer. Already, some of our principal banks have started calling for our 2012 Financial Statement on the basis of which they will take decisions. We will suffer greatly if these lines are further withdrawn or suspended.”

Before the end of March 2013, the bank’s management was supposed to have published its 2012 Financial Statements but this could not happen. It has not happened till date as matters have only worsened day after day.

Mr Tetteh advisedly pinpoints that: “With the continuing losses (and this you will appreciate is completely outside the control of management and the board), customer confidence can become seriously eroded. This is something we must avert as the impact of last year’s liquidity crisis was very daunting and could be worse, if we do not have a good story to tell.

“Indeed, if it will be agreeable to the Bank of Ghana, we would wish to apply to suspend publication of our accounts,” the embattled MD appeals.

Even though FirstRand Group of South Africa have expressed interest in taking over the bank for some time now, Bank of Ghana, has not given its blessing to this, given the numerous problems at hand.

Meanwhile, management believes that, if the BoG should endorse the deal, that could salvage the bank’s parlous situation and put an end to the critical challenges in the interest of all stakeholders.

Efforts by DAILY GUIDE to reach Marian Barnoh, board chairperson and Mornah Quartey, a board member, last Saturday to react to the events unfolding were not successful.

The board chairperson’s cell phone contact was completely out of reach while in the case of Ms Quartey, she responded by saying that she was driving.

On Monday, DAILY GUIDE also made efforts to get the board chairperson but she could not be reached.

Ms Mornah’s line went through but she did not answer. Later when she called back and the reporter introduced himself, she cut the line.

In the early part of 2012, state-owned Social Security and National Insurance Trust (SSNIT), the majority shareholder (98 per cent) in MBG, and the bank’s management concluded arrangements for 75 per cent stake of MBG valued at $91million to be sold to FirstRand.