Banks pursue investments for GH¢400m minimum capital

 

Commercial banks are intensifying efforts to meet the new minimum capital requirement by December this year.

Banking analysts also tell Citi Business News the move is likely to yield in some mergers by the end of the scheduled date.

They however admit that while it has been easy for some banks, it appears others will have to double their efforts to hit the mark by December 2018.

The Bank of Ghana first announced the new 400 million cedis minimum capital requirement in September 2017.

The commercial banks were among others expected to present a recapitalisation plan by November the same year.

As at December 2017, the Governor of the Bank of Ghana, Dr. Ernest Addison disclosed that all thirty-four (34) banks had fulfilled this requirement.

“As part of the processes of meeting the minimum capital within the given time limit, banks were asked to submit feasible recapitalisation plans by the end of November 2017; my understanding is that all banks including the Beige bank have submitted their recapitalization plans,” he stated.

A Credit Consultant, Emmanuel Akrong explains that the majority of banks have demonstrated their ability to meet the minimum capital.

This he says should translate into some potential mergers which may reduce the number of banks by at least five.

“I am not expecting more than five banks consolidating because considering the prevailing conditions there are some ten banks whose preparation are somehow out of the public domain. With this, you’re looking at such banks consolidating and I do not foresee more than ten banks in this category,” Mr. Akrong asserted.

An assessment of the Ghana Stock Exchange has shown that in 2017, about 90 percent of banks listed on the Ghana Stock Exchange performed well on the bourse.

Some analysts say they expect such performances to continue following the banks’ ability to raise additional capital from investors and also meet the new capital set by the central bank.

But reacting to how well placed such banks that are listed on the Ghana Stock Exchange are in meeting the new capital requirement, an Investment Banker, Mahama Iddrisu rather alluded to a sustained positive growth at least well into the second quarter of 2018.

“We should hope that this year we spur the company’s on to make better profits in the first and second quarters and then when they make their rights issues, existing shareholders and even outside investors could see there’s some value on investments in such banks and they can invest,” Mr. Iddrisu explained.

Meanwhile Credit Consultant, Emmanuel Akrong attributed the strong performances of the listed banks  more to the prevailing economic conditions which in his view, supported the banking sector’s growth.

“With the issuance of the energy bond, there is some expectation in the market that those who are exposed are going to be paid. Also looking at the GDP performance of the economy, debt to GDP ratio and all other performance on the stock market, they show that the banks’ performances should be crystallised. As to whether it is because of the new capital requirement people are getting capital, I do not have that news yet,”

For now, commercial banks will have to take their positions in order not to lose their licenses following inability to meet the new directive.

 

Source:citibusinessnews.com/Ghana