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Ghana Regulator to Line Up Investors to Spur Bank Deals

Ghana’s central bank is lining up investors for lenders willing to combine their operations in an unprecedented push to force consolidation and strengthen the industry, according to people familiar with the matter.

Investors from local pension funds to foreign private-equity firms are on standby to pump cash into the system as lenders scurry to bolster their capital levels, according to the people, who asked not to be identified because talks are private. Some closely held banks are resisting the prerequisite to merge and are trying to find their own ways of getting a cash boost, hindering the process, the people said.  By facilitating talks between lenders and investors, the central bank is stepping up efforts to drive consolidation that started with the introduction in September of new rules that gave the West African nation’s 35 licensed lenders until the end of this year to raise their minimum capital levels more than threefold. The banking regulator is trying to bolster a sector beset by bad loans and poor governance, which has curbed the availability of credit in Africa’s third-fastest growing economy.

President Nana Akuffo Addo

President Nana Akufo-Addo has asked a committee to be set-up to come up with proposals to assist the local banks, Deputy Minister of Finance Charles Adu Boahen, said by text message in response to questions. They are almost done with the report, he said, declining further comment. The central bank will have “greater clarity” on which banks are likely to meet the December deadline on the minimum capital requirements by the end of July, Bank of Ghana Governor Ernest Addison told reporters in Accra on Monday.

‘Strongly’ Urged

Ghana’s banking industry is recovering from a crisis after having to impair energy loans stretching back as far as 20 years in 2016. Their woes haven’t ended, with non-performing loans as a percentage of total credit increasing to 23.4 percent in April from 19.8 percent a year earlier, according to central bank data. Two banks collapsed a month before the new capital rules were introduced last year, while the regulator in March placed UniBank Ltd. under administration and two months later appointed an adviser to nurse Sovereign Bank Ltd. back to health.

The central bank has warned the industry that there won’t be any extensions to the deadline after a group of lenders lobbied the president to incrementally increase the capital requirements in stages to 2022. Authorities on April 30 “strongly” urged banks unable to raise new capital on their own to explore opportunities with other companies, adding that it is in the process of preparing guidelines on deals.

Accra-based Heritage Bank Ltd., which began operations in February last year, is one of those shunning combination talks because it wants a partner with the same objective of helping to grow small companies, Managing Director Patrick Edwin Fiscian said in an interview. It is in negotiations with a leading international fund for a cash injection, he said, declining to identify the investor.

Not Happening

While willing buyers abound — with lenders including Republic Bank Ghana Ltd. and Fidelity Bank Ltd. having said they are open to making takeovers — no transactions have yet been announced. Johannesburg-based Standard Bank Group Ltd.’s Stanbic Bank Ghana is prepared to buy another bank, JoyBusiness reported May 16, citing Kwamina Asomaning, the head of corporate and investment banking.

Lenders are finding other ways of upping their paid-capital to the 400 million-cedis ($90-million) minimum from the current 120 million cedis, including transferring surplus funds to their capital holdings. The local units of pan-African lender Ecobank Transnational Inc. and Standard Chartered Plc have said they are going this route, as is local lender, CAL Bank Ltd.

No Depth

Others are opting to either raise cash by selling shares to selected investors, rights issues to existing shareholders or initial public offerings. That’s creating another problem for a market too small to fund all their needs, especially with Johannesburg-based MTN Group Ltd. planning to IPO a stake in its local mobile-phone business that could raise 3.5 billion cedis.

Four foreign-owned banks including Republic Bank Ghana Ltd., Access Bank Ghana Ltd., Energy Bank Ghana Ltd. and Societe Generale Ghana Ltd. have put out notices for rights issues and IPOs totaling 1.1 billion cedis.

“The market doesn’t have that much depth” to raise all that money by December, George Bodo, a Nairobi-based banking analyst at Ecobank Capital Ltd., said by phone. “Essentially, given the short compliance timeframe, mergers and acquisitions will be the way to go.”

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Henry Cobblah

Henry Cobblah is a Tech Developer, Entrepreneur, and a Journalist. With over 15 Years of experience in the digital media industry, he writes for over 7 media agencies and shows up for TV and Radio discussions on Technology, Sports and Startup Discussions.

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