INVESTMENT banker and Chief Executive of C-Nergy Ghana, Mr Michael Cobblah, has questioned government’s decision to recapitalise the National Investment Bank (NIB) and the Agricultural Development Bank (ADB) separately, explaining that the banks would be better off merged into one entity that can deliver enhanced value to their customers and the economy in particular.
Beyond “draining the public purse,” he said maintaining the two banks weakens their ability to support economic transformation due to limited reinvestments from their common shareholder – the government.
Speaking to the GRAPHIC BUSINESS, moments after the government cancelled its earlier plan to merge the two largely state-owned lenders into the proposed national development bank, Mr Cobblah said the latest decision indicated that the government ,“has built up some funds somewhere that they are going to use to recapitalise them.
“But why will they want to do that,”? he asked.
With both banks focusing on specialised areas of agriculture and agro-processing and manufacturing, he said the merger could have created, “a seamless value chain” lender that can fund businesses, right from production to processing.
“So, you can have specialties within the bank where they are funding agric on commercial basis and helping people who want to buy those products or they have some kind of off-takers to also get financing for manufacturing, once it gets there,” Mr Cobblah said.
ABD was plugged out of the agricultural division of the NIB in 1965 and made a separate bank with special focus on providing financing to businesses in the agric and agro-processing value chain.
Fear of job losses
Mr Cobblah said the financial impact of recapitalising each of the two banks on the public purse could have been avoided, if the merger were carried through.
“Because they are both state banks, in terms of the public purse being drained, the merger means that that onerous responsibility of coughing up capital to recapitalise them will not be there.
“If anything, bringing the two of them together will require some top up to make up the difference to get to the GH¢400 million,” he noted.
That notwithstanding, Mr Cobblah, who led the team to integrate the erstwhile The Trust Bank Limited (TTB) into Ecobank Ghana Limited (EGL), said he believed the decision to cancel the merger was mainly to safeguard jobs and maintain government’s popularity.
“What I am also seeing is that if you merge, there could be some duplications of functions but already, we have had enough of people being laid off in the financial sector.
“So, may be, that is what they are also trying to safeguard,” he said.
Mr Cobblah said it was obvious that the job losses from the collapse of the seven banks had waned the popularity of the government.
Adding the merger of NIB and ADB, which will lead to similar losses, was not politically logical, he added.
“That is the only logical reason that I think they have,” he noted.
Collapse of banks
Between August 2017 and August this year, the Bank of Ghana (BoG) withdrew the licences of seven banks in a historic clean-up exercise that the central bank said is meant to purge the banking sector of weak banks, ring-fence the contagion and restore public confidence.
BoG Governor, Dr Ernest Addison, recently said the bank closures had saved some GH¢10 billion of funds belonging to depositors and 70 per cent of a total of 5,000 jobs that were at risk.
This translates to some 3,500 jobs that have been lost to the collapse of the UT and Capital banks in August 2017 and the uniBank, BEIGE, Construction, Sovereign and Royal banks in August this year, using Dr Addison’s figures.
NIB, a special case
According to the financial statements of the two banks, while NIB has GH¢70 million in stated capital, ADB has a little over GH¢275 million as stated capital.
The Finance Minister, Mr Ken Ofori-Atta, was quoted by Bloomberg, an international newswire, as saying the government would fund ADB, “sufficiently” to meet Bank of Ghana’s capital requirement of GH¢400 million by December 31.
He, however, said a decision would be taken on NIB by December 27, since the bank’s situation required that it be treated differently.
ADB, which is listed with the BoG holding a controlling majority of 60.5 per cent, has since called an extraordinary general meeting on December 20 to get shareholders’ approval to raise a minimum of GH¢383 million through a renounceable rights issue.
The EGM will also seek authorisation to convert a GH¢150 million subordinated debt owed BoG into equity.