THE Energy Commercial Bank is set to raise GH¢340 million from the local stock market in its Initial Public Offer (IPO). This follows approval from the Securities and Exchange Commission (SEC) and a “No Objection” from the Bank of Ghana (BoG) for the bank to raise funds from the local bourse.
The decision to go public is expected to help the bank shore up its stated capital to meet the new BoG minimum capital requirement of GH¢400 million by December this year.
Uncertainty greets IPO
The process to allow Ghanaians to become part owners of the bank began in March 2018 but considering the fact that telecom giant, MTN, with its size and appeal could only raise GH¢1.15 billion out of the targeted GH¢3.4 billion from the stock market, only a few weeks ago, there are concerns that the bank may not even meet the required 10 per cent success rate for the IPO to be declared successful and subsequently list on the GSE.
Given that an IPO is dependent on demand and supply dynamics, it is not clear that there is enough liquidity left on the local bourse after 128,152 investors recently contributed a historic GH¢1.15 billion for MTN’s offer.
The President of Nobel International Business School, (NiBS), Professor Kwaku Atuahene-Gima, told the Graphic Business on September 18 that the success of Energy Commercial Bank’s IPO was going to be difficult considering the dwindling trust in the banking sector.
“People have different appetites for different IPOs so the other was a telecom and this one is a bank but with the current climate of low trust in banks, I think even if they will succeed, it will be difficult,” he said.
Prof. Atuahene-Gima, however, explained that the success of the IPO was predominantly dependent on the strength of the stock market.
“It all depends on the strength of the stock market but since MTN’s offer was under-subscribed, it means the market is not strong enough to support another IPO immediately,” he said.
However, the bank is confident it will raise enough capital on the GSE because of its stability and performance over the years.
It has been recording consistent profit since the beginning of its banking business in February 2011.
“We have been operating for almost seven years and it is now time for many Ghanaians to become part of the success story of the bank. We have year on year exhibited solid banking practices (risk, operational and audit) - elements described as very crucial in the sustenance of banking business,” the Board Chairman of the bank, Dr Jimoh Ibrahim, said in a statement issued in Accra on September 18 this year.
However, the statement did not provide evidence of the results of the bank to confirm its position.
He said the IPO would enable the bank to recapitalise ahead of the December 2018 deadline.
"Energy Commercial Bank is moving to another level by listing on the GSE, offering opportunities to many Ghanaians and investors to become part owners of the noble but vibrant institution," Dr Ibrahim said.
If the IPO is successful, the shares floated will subsequently be listed on the GSE to be traded on the secondary market.
The Managing Director and Chief Executive Officer of the bank, Ms Christiana Olaoye, said “the bank has performed well over the years, maintaining healthy capital adequacy and liquidity ratios, thereby ensuring safety of depositors’ funds and maximising returns to shareholders”.
In the coming days, the Transaction Adviser, IC Securities, is expected to market the shares to many investors within the country.