Best Banks for Consolidation LoansThe best banks for consolidation loans
With the privatization of state banks and the liberalization of industries in the latter part of the eighties, Ghana's banks have grown in size and number, and for much of the past decade they have had fast growing economies and high profits margin. At the end of the first half of 2017, GHS86 was the bank sector's asset value.
3 billion ($15.9 billion) were recorded at the end of June 2016. After the acquisitions of Capital and UT in August 2017, the entire banking book is now divided between 34 corporate and general banks incorporated in the Czech Republic, of which 17 are held abroad and 17 domestic. Overall, the number of banking outlets operated in the 10 Ghanaian provinces amounted to 1377 by the end of 2016, an annual rise of more than 200 over the prior year.
PwC, the world' s leading provider of finance, surveyed 25 banks to find that the 10 biggest banks in Ghana each had over GHS 3 billion ($718.2 million) in working capital at the end of 2016, a further 11 banks had between GHS 500 million ($119.7 million) and GHS 3 billion ($718.2 million) in working capital, and the rest had less than GHS 500 million ($119.7 million).
In the course of 2016, uniBank registered the highest total balance sheet expansion with an annual rise of 51%, mainly due to intensive client expansion activities, especially in the area of loans to small and medium-sized enterprises.
United Bank for Africa recorded the quickest growth outside the top five banks and ended 2016 with GHS3. 7 billion ($885.8 million) in asset values, an up 57% on the prior year, which overtook CAL Bank and Zenith Bank by 8th place. Bank deposit growth remains strong, with overall deposit growth trebling compared to GHS18.
5 billion (13 billion dollars) in July 2017. Fidelity Banks, which is uniBank's subsidiary, is the sole subsidiary of Fidelity Banks. The five best banks by investment sizes are the same as by investment sizes, with the difference that Fidelity Banks is uniBank's subsidiary. As of September 2017, yearly percentages on U.S. Government funds in Ghana vary widely from country to country, with Standard Chartered and FBN Banks providing interest at 4.9% and 5.0%, respectively.
3%, while Premium Bank, Omni Bank, Royal Bank and Bank of Baroda all offer interest at 14.5% or higher. Until July 2017, the net receivables were GHS31. 6 per cent increase in loans in 2016 and the 29.1 per cent in 2015. The proportion of receivables in the balance sheet decreased from 47% in 2015 to 41% in 2016.
Loans to the consumer goods industry were less good. During the first six-month period of 2017, overall loans from the consumer banking industry amounted to GHS32. 1.2 billion. This is attributable to a very low value for 2016, which was 8.2% lower than in the year before. The high key interest rates of the German Federal Joint Stock Company (BoG), which rose from 12 to 12, were one of the reasons for this deceleration in the granting of loans in the course of 2016.
5 percent by the end of 2016, thus helping to reduce demand for credit. However, other banks could not keep their head above the water. Thus, for example, the collapse and ensuing acquisition of UT Bank and Capital Bank in August 2017 was mainly due to their non-sustainable non-performing loans accounts in connection with management failures by their holdings.
"Once the business community grows again, along with better collateral security through the new address system and better country registrations, we can look forward to a decline in NPLs," said Osei Asafo-Adjei, executive manager at Royal Bank, OBG. Whilst the reorganisation of the inherited liabilities of state-owned companies has had some results, the number of NDPs in the privatesector continues to grow.
Until June 2017, the overall PPL rate was 21. Compared with June 2016, when the ratios were 18, this represents an improvement of 2.4 points. 94 of these were in the residential area. Even though the agricultural industry made up only 8% of the NDPs, it had the highest share of NDPs of all segments at 30.3%.
An increase in the number of non-performing loans in combination with the increase in the number of loan facilities has affected the banks' viability. 5 billion ($359.1 million) for the first half of 2017 was 0.4% less than the year-earlier period due to the challenging year of 2016. 4 billion ($574.6 million) in 2015, but these gains were unequally spread, with two-thirds of banks interviewed by PIWC reporting less favorable results in 2016 than in 2015.
Banks' pre-tax profits were relatively flat between 2015 and 2016 at 33. Over the past four years, the Indian Bank of Baroda has been a runaway that has continuously increased spreads by over 85%; only six other banks had spreads of over 40% in 2016. Around 13 banks had 2016 spreads below 20%, compared with seven in 2015.
As the NPL growth prompted banks to step up borrowing, Treasury notes were offering interest at 20%, resulting in a much safer return on investments. During 2016, the sector's net interest surplus rose by 19% year-on-year to GHS5. Interest earned on receivables decreased from 64% to 54% in the reporting year, while financial investments revenues rose by 32%.
Banks' aggregate sovereign bonds rose by 47% to GHS 18 billion ($4.3 billion). In the first half of 2017, this tendency continued: loan revenues fell to 44.1% and capital gains to 40.1%. "As soon as we have cleared the inherited liabilities of the power industry, for which the issuance of bonds is crucial, the next issue for the bank industry is how to initiate an economical rebound that makes operations more profitable and prevents collateral damages in the consumer sector," Sampson Akligoh, Finance Department General Manager, OBG said.
Nevertheless, with the decline of 91-day invoices - which by October 2017 had risen to 12% - from 22nd to 22nd place, the number of invoices has fallen. "Due to the impact of the 2015 power meltdown, many banks took defensive stances in 2016 and 2017, which meant that their credit lines shrank," Robert Quansah, Bank of Africa's chief strategist, said to OBG.
"No one wants to expand their positions in NPLs, but with a 12% monetary policy, banks have no option but to extend credit. In 2016, the preferential debt issuance industries were relatively stable, with most of the equity going to the finance industry (24.9%), followed by service industries (18.9%), utility companies (13.3%), processing industries (9.2%), transportation (9%) and building (8.1%).
However, the high proportion of NDPs in the agricultural and fishing sectors has hindered the granting of new loans, with the result that the industry received only 2.5% of the loans. The Ghanaian Construction Bank was founded in July 2017 in reaction to this market need. It conducts corporate and retail business and will concentrate strongly on financing projects in the building industry.
Commenting on the bank's kick-off in Accra, Millison Narh, then first vice president of the Board of Governors of the Czech Republic, said: "I see the opening of this branch as a tribute to the increasing importance of the building industry for the business community. Since many years, the Board of Boys has been advising on consolidation in an open manner and enforces higher minimal equity standards to promote it.
It has also, however, issued four new licenses between January 2016 and July 2017. In this respect, the BoG's latest step, more than three times the minimal requirement of $95.8 million (GHS400 million), seems to encourage the mergers and acquisitions of sovereign banks (see analysis). Although the terms of credit continued to be unfavourable during 2016 and 2017, most banks continue to be well above the 10% equity requirement (CAR).
While uniBank and Ecobank posted the lower levels of cash in July 2017 with 10% and 11% respectively, Barclays Bank, GCB and Fidelity all had more conservative holdings of 24%, 25% and 30% respectively, thus reducing the need for acquisitions and mergers. As of 2014, according to the World Banka, 40% of Ghanaians had a banking deposit, 19% a nominal saving deposit and 8% a nominal credit from a banka.
Although these numbers do not take into consideration the large number of microloans and austerity programs provided by several hundred MFIs (see analysis), increasing banking penetration is an important move towards the government's objective of formalizing the business sector. In Ghana, wireless penetration in April 2017 was 137%, with many people having more than one line.
From 2012 to 2015, the value of MM trades rose from GHS594 million ($142.2 million) to GHS35. By 2016 alone, this number had grown by 58% to GHS 56 billion ($13.4 billion), of which GHS 23 billion ($5.5 billion) was attributable to MTN's MTN portable cash platforms. Yet it is still the case that portable terminals still need the holder to have a banking relationship and wireless operators need to work with the banks.
Increasingly popular in countryside areas, the sector provides sufficient opportunity for banks to broaden their client bases. "Telecommunications can' t keep funds, so the MM win means banks can work with wireless carriers to connect wallet accounts," Martha Acquaye, director of e-business at CAL Bank, tells OBG.
Whereas the Federal BoA did not enact a law on MM until 2015, the advocacy work of telecommunications companies and banks - who each want a greater part in MM - means that the rules can be revised in the years to come. The New Patriotic Party administration has from the outset shown resolve to reinforce and modernize the finance industry through greater use of equity market, greater borrowing and bigger, better capitalized banks.
The Ministry of Finance's key 2018 targets for 2018 are to promote better accessibility to information and research, greater sectoral openness, strengthened regulation capacities and enhanced vocational education and integration and financial integration programs. A major recent change, the new MCR, will enhance the flows of loans by stimulating small domestic banks to consolidation, leading to larger banks with the equity and capability to streamline lending portfolios and manage more loans to the consumer sectors.