UniBank secures over GH¢600m investment to shore-up capital

UniBank has secured over GH¢600million of fresh capital injection to position itself as one of the earliest banks to meet the central bank’s increased stated capital requirement, a source close to the deal has told B&FT.

In a move that is expected to repose some much-needed confidence in local banks, the fresh capital – coming from a financial consortium led by Belstar Capital, a turnkey project finance and implementation institution – according to the source, will see the bank’s capital, including income surplus, reach almost a GH¢1billion; positioning it as one of the most dominant players in the market.

Though uniBank is substantially capitalised with a paid-up capital of GH¢310million and an income surplus of some GH¢52million, leaving just about GH¢38million to meet the BoG’s threshold, the source noted that uniBank wants to position itself as the industry’s premier local player – ready to help economic development.

“Though uniBank is safer than other banks, I believe the bank wants to show other local banks that they can attract good capital – especially local capital – and still remain local and support economic growth, just like the foreign banks are doing,” the source added.

Since the central bank increased the stated capital of banks from GH¢120million to GH¢400million, all but one of the local banks are in need of fresh capital injection – with some needing as much as GH¢250million to stay in business or face universal banking licence withdrawals.

This situation led some analysts to opine that the banking sector, already dominated by foreign players, will be totally controlled by the multinationals, continental and sub-regional institutions.

Ghana’s banking landscape, according to central bank data, indicates that local banks control only 21 percent of the industry’s total assets – which was not the case two decades ago, when the industry was dominated by state banks.

B&FT’s analysis of current paid-up capital of banks and income surpluses of all 34 universal banks operating in the country shows that apart from GCB – which has a total paid-up capital of GH¢703million – local banks with a capital shortfall will have to find hundreds of millions to recapitalise.

Even though the local banks are currently scouting for domestic and foreign investors so as to stay in business, most of them are confident they will meet the BoG’s requirement – and that could lead to a heavy injection of about GH¢5billion in fresh capital into the economy.

Finance Minister Ken Ofori-Atta has already noted that the economy “needs about five strong local banks” supporting the foreign ones to develop the economy.

Despite the worries of local players, the plurality of banks has over the last decade led to more innovation to the benefit of consumers. There are more electronic-based products on the market now than ever before; a cost of credit, though very high, is more competitive; and accessibility to physical bank branches across the country has improved.

The present universal banks have been preparing for the next half-decade since 2014. Indeed, PwC’s 2014 Ghana Banking Survey noted that: “Many of the [banking] executives have already begun a switch from a ‘watch and see’ mode to a ‘position and grow’ mode in anticipation of changes to the banking sector in the coming five years”.

This clearly shows that local banks have a deep understanding of the market and what it holds in the future, despite their limited financial muscle and uniBank’s move, the source added. It goes a long way to bolster the confidence of local banks that they can be leaders of economic development in the next decade.