Shareholders of Societe General (SG) Ghana Limited have approved a proposal by the bank to raise its stated capital from GH¢62 million to GH¢100 million through a bonus issue to enable the bank to maintain sufficient capital reserves to support its risk appetite.
It is also in line with the Bank of Ghana’s request for banks to strengthen their capital and equity in order to be able to scale the difficulty that the country and the banking sector may face in the future and also because it would stop granting waivers for Single Obligor Limits.
Mr. Gilbert Hie, Managing Director of SG-Ghana, speaking to journalists at the bank’s 35th Annual General Meeting in Accra on Tuesday, said although the economic and financial environment in Ghana was not perfect at present, SG believed Ghana was a solid country and would improve in the coming days, especially with the intervention of the International Monetary Fund (IMF).
“SG wants to participate in the recovery and development of this country in the next few years, that is why it is absolutely important to increase our capital, not only from the regulatory point of view but also to develop our business, to develop our Single Obligor Limits in order participate in bigger transactions especially in the oil and gas industry”, he stated.
Mr. Hie explained that the oil and gas industry was very sensitive finance-wise, especially with the depreciation of the Ghana cedi which meant that they needed more cedis to finance such projects. He said the bank also wanted to participate in investment programmes, trade in oil and gas, finance imports, and to develop their network in Ghana.
Due to this move, the bank’s shareholders will not be paid, in cash, their dividends for the year ended 31 December, 2014. The bank would however issue Bonus Shares of one new bonus share for every 10 existing shares held by shareholders.
The meeting also approved the issuance of 33,389, 390 shares be issued to support the Bonus Share Issue.
“Increasing capital is very often asking the shareholders to bring fresh money. It has been a challenge for us to choose between a Rights Issue, Bonus Issue and some other solutions. We believe that in this difficult market time, it was difficult to go for a Rights Issue because we have a lot of small individual shareholders, from whom it would be difficult to ask for fresh money, especially in this difficult financial environment” he noted.
Mr. Hie added: “That is why we decided to adopt an in-between solution that would not frustrate our existing shareholders but give them a bonus share amount of about GH¢40,000,000. It would increase their portfolio by 10 percent, which amounts to double the GH¢20,000,000 dividends distributed last year. Those who need some liquidity can sell half of their Bonus shares.”
He also explained that the bank’s overall equity would be increased by GH¢120,000,000, comprising GH¢80,000,000 subordinated Tier 2 loan from SG Global, and the GH¢40,000,000 that would be raised from the Bonus Issue.
Speaking on the Bank’s performance in the year under review, he said the bank had performed very well despite the economic environment, having recorded Profit before Taxation of GH¢71,016,619, from which taxation of GH¢21,205,074 was deducted, giving a Profit after Tax of GH¢49,811,545. This represents an increase of 37.0 percent over the previous year’s figure of GH¢36,364,192.
Net banking income increased by 45.41% while Current Operating Expenses grew by 33.16%. “Shareholders’ Funds increased from GH¢193,000,401 to GH¢221,989,165, representing an increase of 15.02%” he stated. This, he said, had been made possible due to SG’s modern setup with new solutions such as hedging.
“One of the main challenges of operating in Ghana in 2014 was the depreciation of the local currency. SG Group is able to offer its corporate customers and importers hedging solutions, which means they can cover their position and forecast the final price for their imports and incorporate it in their price,” he stated.
“Fast forward, we are proposing swaps; we are proposing derivatives, solutions which we can offer because we belong to a very big international group and we have all these new products. It is a win-win situation to be a client of SG,” he declared, adding that the bank was also working on a mobile application for its customers which should be completed by the end of the year.
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