Ghana Banking Survey - pwc.com · UT Bank Limited 1995 Local 9 Prince K. Amoabeng CAL Bank Limited* 1990 Local 13 Frank Adu Jr. Ecobank Ghana Limited* 1990 Foreign 44 Samuel Ashitey

The Global Financial Meltdown:Will Ghana’s Banking Industry survive the crunch?*

Ghana Association of Bankers

*connectedthinking

Ghana Banking Survey

Disclaimer

This report - Ghana Banking Survey 2009 – is a joint collaboration of PricewaterhouseCoopers (PwC) and the Ghana Association of Bankers(GAB). It aims to provide general information on Ghana’s formal banking sector and the performance of banks operating in the country for theperiod between 2004 and 2008. The survey does not purport to provide answers to all possible questions and issues pertaining to the country’sbanking industry. Neither does it constitute an invitation to trade in the securities of the banks covered in the survey.

The banks’ annual reports and audited financial statements for the years 2004 to 2008 were our principal sources of information. While weacknowledge that our sources of information are reliable, we provide no guarantees with respect to the accuracy and completeness of theinformation contained therein.

We will therefore not accept any responsibility or liability for any errors, omissions, or mis-statements that this report may contain. Neither will weaccept any responsibility or liability for any loss or damage, howsoever occasioned, to any person, body corporate or organisation of any formrelying on any statement or omission in this report.

Contents

Disclaimer 2List of abbreviations 4Participating banks 5Introduction 6The global financial meltdown; will the industry survive the crunch? 8Overview - the economy 12Overview - the industry 16Quartile analysis 21Market share analysis 33Profitability and efficiency 38Return to shareholders 41Asset quality 43Liquidity 46Capital structure and financial risk 48Glossary of key financial terms, equations and ratios 50Our profile 52About us 54

Ghana Banking Survey 2009

PricewaterhouseCoopersin association withGhana Association of Bankers

3

List of abbreviations

ABL Amalgamated Bank Limited ICB International Commercial Bank LimitedADB Agricultural Development Bank Limited IFRS International Financial Reporting StandardsBaroda Bank of Baroda Limited IBG Intercontinental Bank (Ghana) LimitedBBGL Barclays Bank of Ghana Limited IMF International Monetary FundBOG Bank of Ghana MBG Merchant Bank (Ghana) LimitedBSIC Sahel -Sahara Bank Limited NIB National Investment Bank LimitedCAL CAL Bank Limited PAT Profit after taxDPS Dividend per share PBL Prudential Bank LimitedEBG Ecobank Ghana Limited PBT Profit before taxEPS Earnings per share PwC PricewaterhouseCoopers (Ghana) LimitedFAMBL First Atlantic Merchant Bank Limited ROA Return on assetsFBL Fidelity Bank Limited ROCE Return on capital employedGAAP Generally Accepted Accounting Principles ROE Return on equityGAS Ghana Accounting Standards SCB Standard Chartered Bank Ghana LimitedGCB Ghana Commercial Bank Limited SG-SSB SG-SSB Bank LimitedGDP Gross Domestic Product Stanbic Stanbic Bank Ghana LimitedGTB Guaranty Trust Bank (Ghana) Limited TTB The Trust Bank LimitedHFC HFC Bank (Ghana) Limited UBA United Bank of Africa (Ghana) LimitedIASB International Accounting Standards Board UGL UniBank Ghana LimitedICAG Institute of Chartered Accountants, Ghana UTB UT Bank Limited*ICT Information and Communication Technology ZBL Zenith Bank (Ghana) Limited*In April 2009, BPI Bank changed its name to UT Bank



4

Participating banks

22 out of the 25 banks currently operating in the country participated in this year’s survey as listed in the tablebelow.

Name of bankYear ofincorporation

Majorityownership

Number ofbranches Chief Executive Officer( as at May 2009)

Agricultural Development Bank Limited 1965 Local 51 Yaw Opoku AtuaheneAmalgamated Bank Limited 1997 Foreign 12 Menson TorkonooBarclays Bank of Ghana Limited 1917 Foreign 154 Benjamin T DabrahBank of Baroda Limited 2007 Foreign 1 V SreedharanBSIC Ghana Limited** 2008 Foreign 1 Robert BentilUT Bank Limited 1995 Local 9 Prince K. AmoabengCAL Bank Limited* 1990 Local 13 Frank Adu Jr.Ecobank Ghana Limited* 1990 Foreign 44 Samuel Ashitey AdjeiFidelity Bank Limited 2006 Local 9 Edward EffahFirst Atlantic Merchant Bank Ltd 1994 Local 5 Jude ArthurGhana Commercial Bank Limited* 1953 Local 148 Lawrence Newton Adu-ManteGT Bank (Ghana) Limited 2004 Foreign 9 Dolapo OgundimuHFC Bank Gh. Limited* 1990 Local 17 Asare AkuffoIntercontinental Bank Limited 2006 Foreign 12 Albert MmegwaInternational Commercial Bank (Ghana) Limited 1996 Foreign 12 L K GanapathiramanMerchant Bank (Ghana) Limited 1971 Local 15 Osei OwusuNational Investment Bank Ltd** 1963 Local 27 Percival Alfred KuranchiePrudential Bank Limited 1993 Local 9 Stephen Sekyere AbankwaSG-SSB Bank Limited* 1975 Foreign 29 Alain BellissardStanbic Bank (Ghana) Limited 1999 Foreign 13 Alhassan AndaniStandard Chartered Bank Ghana Limited* 1896 Foreign 19 Hemen ShahThe Trust Bank Limited 1996 Local 17 Isaac Owusu-HemengUniBank Ghana Limited 1997 Local 12 Ammish Owusu AmoahUnited Bank of Africa (Ghana) Limited** 2004 Foreign 16 Nnamdi OkonkwoZenith Bank (Ghana) Limited 2005 Foreign 12 Andy Ojei* These banks have their shares listed on the Ghana Stock Exchange (GSE)** These banks did not participate in this year's survey


PricewaterhouseCoopersin association withGhana Association of Bankers 5

Introduction

We are pleased to share with youthe results of our 2009 annualsurvey of Ghana’s banking industry.

Out of 25 banks licensed to operatein Ghana, 22 banks participated inthe survey.

In 2008, the global financial crisisintensified. The year saw a collapseof reputable global financialinstitutions and unprecedentedgovernment support for somebanks in Europe and the UnitedStates.

In spite of the global financial crisis,the Ghana banking industryremained stable. Industry return onequity (ROE) and return on assets(ROA) remained at 22% and 2%respectively. Net interest income forthe industry and net profit after taxincreased by 38% and 32%respectively.

We hope this publication will continue toinform and engender useful discussionsamongst policy makers, regulators, banksand the business community at large.

We thank you for your continued supportand patronage of the survey. Weparticularly note our appreciation for theroles of the participating banks, GhanaAssociation of Bankers, and Bank of Ghana.

PricewaterhouseCoopers is proud of itsachievements in helping to shape thefootprints of the banking industry on theGhanaian economy.

We wish you more success in yourbusinesses.

Dear reader



7

All the banks adopted the IFRSreporting framework for the yearended 31 December 2008. Tofacilitate a more realistic analysis,we have therefore limited ouranalysis of the banks financialperformance to only 2008 and 2007(using restated IFRS figures).

The first part of this report, focuseson the impact of the global financialcrises on the Ghana bankingindustry. We have also presentedunder this first part, a backdrop ofthe macro-economic environmentwithin which these banks operated.

The second part highlights anddiscusses key performanceindicators and trends in the bankingindustry for the two years, 2007 and2008.

Global financial meltdown: willthe industry survive the crunch?

The Global financial meltdown: It all began in 2007, as the sub-prime mortgage crisis inthe United States



9

Its effects on Ghana

Emerging markets with relativelydeveloped financial systems have beenaffected by their integration with globalfinancial market. Through their globalfinancial links, Ghana, Nigeria, Kenyaand South Africa are suffering fallingequity markets, reversal of capital flows,rising inflation and pressures onexchange rates more acutely in 2009.

Ghana relies heavily on the EuropeanUnion (EU), US and Asia for its exportmarkets. There is growing uncertainty asto how long Ghana can sustain a strongpace of economic growth in the face ofsluggish demand in the major developedmarkets emanating from the rapidlyevolving global downturn. In the 2009budget, GOG recognised the impact ofthe global downturn and projected a GDPgrowth rate of 5.9% for 2009 ascompared to 7.3% achieved in 2008.

The Global financial meltdown

The financial crisis started in one cornerof the US mortgage market, but thefallout from the collapse of the sub-prime lending bubble has spread acrossthe globe. What began as crisis forindividual markets and institutions hasnow undermined the foundations of theentire global financial system.

Credit markets were the first to beengulfed, but the contagion hassubsequently reached all asset classesthat were reliant on a combination ofcheap money and high leverage,bringing the demise of the independentUS investment banking model andsending countries from Iceland toHungary cap-in-hand to the IMF.

The full extent of the interconnectednature of the world’s financial marketshas been revealed, as has the need toaddress the underlying globalimbalances that underpinned investmentflows before the crisis.

Financial institutions and governmentshave attempted desperately to containthe crisis with fresh capital from statecoffers and sovereign wealth fundinvestors, with governments providingliquidity and financial guarantees andin some cases holding major orcontrolling stakes in banks. Hoping toensure that a crisis on this scale isnever repeated, governments andregulators are pursuing “zero risk”regulation. Their influence in thefinancial system will be far-reachingand long-term.

The result will be a banking systemunder a new stricter governancemodel, in which risks and returns willbe lower, operating in a globaleconomy that will look very differentfrom the pre-crisis world order.

Ghana and other emerging markets have been affected because of global economiclinkages. The main exposure for banks is in the form of nostro balances andplacements with banks abroad



. The prices of Ghana’s key exports,cocoa and gold, have continued to risein 2009 despite the economicdownturn. However, economists predicta protracted global recession, whichmay lead to a steep decline in the priceof cocoa. The price of gold might,however, continue its rise because goldis considered a safe asset duringeconomic crisis. The timber industryhas been hard hit with falling demandin the real estate market in its exportdestinations – mostly Europe.

The most damaging potential effect ofthis crisis may come from reducedremittances and capital flows. Inwardremittances into the country contributean important source of inflow for theGhanaian economy. According toMonetary Policy Committee PressRelease – May 2009, the privateinward transfers through the banks inthe first quarter of 2009 was US$1.98billion, 7.3% decline from those for thesame period in 2008.

Most bankers we spoke to were concernedabout a further tightening of donor flowsand expect drops in foreign directinvestment in 2009.

To allay some of these fears, the G20 at theLondon Summit pledged more funds todeveloping countries through its multilateralagencies.

Impact on the industry

The limited participation in global marketdisintermediation and lack of integrationwith the global financial markets appear toshield the Ghana banking industry from adirect impact of the crisis.

The global downturn however still has animpact on Ghana’s financial market .According to BOG’s Financial StabilityReport (Volume 5 No. 1/ 2009), thepossible direct links to the global financialcrisis by Ghanaian banks continue toremain their exposure to counterpartiesabroad in the form of nostro balances andplacements

At 31st December 2008, nostrobalances and placements constituted82% of the industry’s net worth.

Borrowings from foreign banksconstitute a key source of funding forlocal banks. Stress analysesconducted by BOG show that only asignificant default or recall ofborrowings in excess of 50% couldpose threat to the financial system.Placements, nostro balances andborrowings are concentrated with fewinternational banks and thus requireclose monitoring of their performance.

Another threat to banks is theirvulnerability to a substantialweakening in customers’ incomes anddebt servicing capabilities in aneconomic slowdown. The deteriorationin asset quality of Ghana banks from1.5% to 2.2% is an indication of theadverse impact of the globalmeltdown.

Analysts predict that the effects of the crisis on developing countries would be feltmore significantly in 2009; however, the timing and quantum remains uncertain



A potential effect of the global crisis is therisk of contagion from distressed foreignbanks to local banks. Parent banks couldwithdraw funds from subsidiaries bydistributing profits, calling in loans to theirsubsidiaries and cutting backinvestments in local subsidiaries inemerging markets.

Conclusion

BOG has indicated that, over the pastyear a number of measures have beenintroduced that should re-enforce theability of banks in Ghana to withstandshocks and protect the soundness of thefinancial system. This includesstrengthening the regulatory andsupervisory framework with the passageof the Borrowers and Lenders Act, 2008(Act773), the Non-Bank FinancialInstitution Act, 2008 (Act 774),

..

.

Home Mortgage Finance Act, 2008 (Act770) and the Anti-Money LaunderingAct, 2008 (Act 749).

The growth of the industry in 2008suggests that global financial crisis didnot have severe impact on the Ghanabanking industry in 2008. However,analysts predict that the effects of thecrisis for a developing country likeGhana would be more significant in2009. However, the timing and quantumremains uncertain.

Overview – the economy

The economy grew at 7.3% ; in spite of the global economic downturn

13

Economic Growth

At the time that this report was beingprepared, the Ghana Statistical Servicehad revised its previous estimated realGDP growth rate of 6.2% for 2008 to7.3%. This is certainly a remarkableachievement given the challengesfaced by the economy on bothdomestic and international fronts.

The Agriculture sector continues todominate the economy, with a 34%share of total GDP. However growth forthe year was only 5.1%. Dependenceon the weather and elementaryagricultural technology continue tohamper the growth of the agriculturalsector.

The Services sector, which contributes31.8% of total GDP led the growth at9.3%. Growth in the sector wasunderpinned by significant growth inWholesale and Retail, Hotels andRestaurants sub-sectors, due partly to

the Confederation of AfricanNations cup (CAN 2008) andAfrican Union (AU) conferenceheld during the year.

Next, was the industrial sector,largely import dependent, itgrew by 8.1% and contributed25.9% towards the 2008 totalGDP.

The major contributory factor tothe sector’s growth was theelectricity sub-sector’s growth of19.4% which recovered from adecline in 2007 due to theenergy crisis experienced bythe country in that year.

Source: MoFEP, 2009 Budget Statement


Sectoralgrowth rates

2004 2005 2006 2007 2008

Agriculture 7.5% 6.5% 5.7% 4.3% 5.1%Industry 5.1% 5.6% 7.3% 7.4% 8.1%Services 4.7% 5.4% 6.5% 8.2% 9.3%

Real GDP growth rate

5.8% 5.8%6.2% 6.3%

7.3%

5.6%

6.0%

6.4%6.8%

7.2%

7.6%

2004 2005 2006 2007 2008



The single digit inflation rate remains elusive whiles the battle with interest rates rageson……

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Inflation

Between 2004 and 2007, year-on-yearinflation remained relatively stablebetween 11.0% and 14.8%. However in2008, the inflation rate surged, rising from12.8% at the beginning of the 2008 andpeaking at 18.4% in July 2008 mainly as aresult of the rise in world market prices forcrude oil- from US$90 per barrel inJanuary to a record high of US$147 perbarrel in July. Over the next four months,the inflationary pressure softened butpicked up again in the last two months ofthe year to close the year at 18.1%.

A combination of factors accounted forthe behaviour of the domestic inflation.Predominately among them were, highfood prices, depreciation of the cedi andunfavourable oil prices prior to the onsetof the global financial crisis.

Interest Rate

Over the last five years, the CentralBank’s prime rate has moved in lock-stepwith the inflation rate,

but cautiously to prevent the crowding-out of the private sector.

In the course of the year, 2008, BOGraised the prime rate on three differentoccasions, from 13.5% in January to14.25% in March to 16% in May andfinally 17% in July, all in attempt toreduce inflation.

Source: Bank of Ghana statistics

Nominal inflation and interest rates

12.7%

28.8%

22.3% 21.3% 21.0%

27.0%

18.5%

12.5%

11.0%11.8% 14.8%

18.4%

17.0%13.5%15.5%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

2004 2005 2006 2007 2008

Average inflation (y/y) Interest rate (commercial lending) Prime rate



The Ghana Cedi tumbled against all major global currencies with the exception of aweak British Pound Sterling.

15

Exchange Rate

After a relative stable period from 2004 to2007, the cedi lost grip against thecountry’s three major trading currencies in2008. The cedi depreciated by 20.9%against the dollar and 17.3% against theeuro. However , it appreciated by 9.0%against the pound.

The high imports bill and weakinternational reserves contributed toweakening the cedi against the dollar.


Exchange Rate of major international currencies to theCedi

0.97

1.261.12 1.13 1.21

1.421.701.74

1.571.81

1.93

0.920.910.90

1.79

0.0

0.5

1.0

1.5

2.0

2.5

2004 2005 2006 2007 2008

US$ Euro Pounds Sterlings



Overview – the industry

All banks managed to jump on the IFRS bandwagon by the deadline…..

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Complying with IFRS

BOG directed all banks to adopt the IFRSreporting framework for preparing theirfinancial statements for the year ended 31December 2008. All banks stated in their2008 published accounts that they hadprepared their financial statements inaccordance with the IFRS accountingframework.

For multinational banks listed onEuropean stock exchanges, the directivehad no effect on their reporting since theyhad already adopted the IFRS accountingframework to meet their group reportingrequirements.

The most significant component of thecost of adoption for first time adopters wasthe cost of training staff. Banks anticipatefurther cost as they embed IFRS reportingand cope with subsequent amendments,interpretations and new standards.

A practical challenge may emerge as theregulatory reporting to BOG continues toremain along the lines of the Ghana GAAPwhile year end reporting is preparedunder IFRS.

The parallel reporting creates a duplicationof efforts and avoidable costs.

Preparation towards meeting the newminimum capital requirement

The year 2008 was also marked withpreparations towards meeting the newstated capital requirements of GH¢60million for foreign banks (banks withforeign majority ownership) by 31December 2009 and GH¢25 million andGH¢60 million for local banks (banks withlocal majority ownership) by 31 December2010 and 31 December 2012 respectively.

Almost all the banks we spoke to beforefinalising this report, regarding theirrespective preparation towards meetingthe minimum capital requirement werecertain of meeting the increase andconcurred with BOG that the industry’scapital needs to be shored up.

Apart from Merchant Bank Ghana Limitedand The Trust Bank Limited who are inmerger discussions, businesscombinations do not appear to be adesired option to achieve the minimumcapital. The industry seems to favourother options.

Foreign unlisted banks have indicated thatthe extra capital will come from the parent,whereas local banks are consideringprivate placements, rights issues andlistings on the stock market.

On the basis of the information disclosedin the 2008 financial statements of banks,we have presented in the table on the nextpage, the current level of the respectivebank’s capital and how much will beneeded to meet the minimum requirement.

We have assumed that banks wouldconsider capitalising their income surplusas reported at 31 December 2008. Wehave also considered the withholding taximplications of this route to achieving theminimum capital required. Under GhanaTax laws, a transfer from income surplusto stated capital attracts a withholding taxof 8% (currently).



ADB, GCB, MBG and BBGL have already crossed the bridge …… life jackets must beon the way for most of the foreign banks; and local banks……..?

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(Thousands of Ghana Cedis)Meeting the minimum capital requirements – Status as at 31 December 2008

B ank Status S tatedC ap ital

S hare D eals Incom eS urp lus

Availab leC ap ita l

Availab leC apita l after

tax

M in im umC apita l

Add itionalC ap ital

B BG L Fore ign 46,096 - 27,697 73,793 71,577 60,000 -E BG Fore ign 16,400 - 37,474 53,874 50,876 60,000 9,124S C B Fore ign 13,131 - 43,162 56,293 52,840 60,000 7,160S G -S SB Fore ign 7,000 2,944 36,616 46,559 43,630 60,000 16,370S tanb ic Fore ign 18,325 - 22,237 40,562 38,783 60,000 21,217ZBL Fore ign 34,778 - 427 35,205 35,171 60,000 24,829IB G Fore ign 14,359 - 2 ,014 16,373 16,212 60,000 43,788A BL Fore ign 7,200 - 2 ,174 9,374 9,200 60,000 50,800IC B Fore ign 7,759 - 18 7,777 7,776 60,000 52,224G T B Fore ign 10,143 - (2 ,719) 10,143 10,143 60,000 49,857B aroda Fore ign 7,000 - 191 7,191 7,175 60,000 52,825U BA Fore ign 17,508 3,075 (14,944) 20,583 20,583 60,000 39,417G C B Loca l 72,000 - 87,289 159,289 152,306 25,000 -A D B Loca l 50,000 - 13,952 63,952 62,836 25,000 -M BG Loca l 26,800 - 8 ,731 35,531 34,833 25,000 -C AL Loca l 8,272 1,911 10,559 20,742 19,897 25,000 5,103H FC Loca l 16,944 25 1,619 18,587 18,458 25,000 6,542T T B Loca l 7,000 - 11,476 18,476 17,557 25,000 7,443P BL Loca l 7,100 - 2 ,278 9,378 9,195 25,000 15,805F ide lity Loca l 8,617 - (140) 8 ,617 8,617 25,000 16,383U G L Loca l 7,535 - 454 7,989 7,953 25,000 17,047FAM B L Loca l 7,012 - (1 ,869) 7 ,012 7,012 25,000 17,988U T B Loca l 7,630 9,287 (8 ,295) 16,917 16,917 25,000 8,083

418,609 17,242 280,399 744,218 721,786 995,000 462,003



Banks focused on enhancing and promoting existing products to improve visibility andupgraded banking IT platforms to enhance service delivery

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Few new products were introduced tothe market in 2008. Banks focused onenhancing and promoting existingproducts to improve visibility.

Notable among the few productslaunched, were the following tailor-madeproducts, cut to fit the needs of specificgroups in the market;

• Hujjah account – IBG – (to enableMuslims embark on their Hajjpilgrimage)

• Edwardipa – Fidelity – (to supportsmall and medium enterprises(SMEs)

• Boafo business credit – SG-SSB –( to support SMEs)

• Diva club account – SCB – (forWomen, offers discount on itemsbought from selected shops)

• Royal banking – GCB – (to providedifferentiated services to the bank’shigh net worth customers

Branch expansion programmescontinued to be part of the growthstrategy of banks in 2008 with a view toextending banking to the door step ofcustomers.

The following banks had the highestadditions to their existing branches in2008;

BBG – 59

EBG –12,

GCB – 11

GTB – 6,

HFC – 6

In response to competitive pressure,banks continued to make significantinvestments in upgrading IT platforms byautomating and centralising various backoffice activities to enhance the quality ofservice delivery to their customers. In2008, SCB, EBG and GCB upgradedtheir banking application software.

In response to the increasing role of ICTin banks’ service delivery, BOGpublished guidelines on branchlessbanking in August 2008 to allowcollaboration between banks,telecommunication companies andmerchants to provide greater access tobanking and financial services to thewider public.

Also in 2008, a common electronicplatform (the e-zwich) was establishedto further develop the payment andsettlement system by making it possibleto link all banking institutions with abiometric smartcard as a vehicle forinclusion of all segments of thepopulation.



The regulatory landscape was strengthened with four new Acts; Non-Bank FinancialInstitution Act, 2008 (Act 774) Home Mortgage Finance Act (Act 770), Borrowers andLenders Act (Act 773) and Anti-money Laundering Act (Act 749).

20

The table opposite shows the keyregulatory developments that haveoccurred within the industry over the pastfive years.

In 2008, four bills relating to the bankingindustry were passed into law byParliament to support the development ofthe financial sector;

1. The Borrowers and Lenders Act (Act773)- to ensure high level disclosure increditor and borrower relations. It aims togive clarity to lending conditions andrights and obligations of lenders andborrowers.

2. Non Bank Financial Institution Act (Act774)- it seeks to provide a framework toprovide effective prudential regulationand supervision of the wide range of non-bank financial institutions.

3. Home Mortgage Finance Act (Act 770)-to regulate home mortgagefinancing and applies to transactions between financial institutions andtheir customers (mortgagor) to finance the construction, purchase,completion, extension or renovation of residential property either forownership, sale or rental.

4. Anti-money Laundering Act (Act 749)- It seeks to prohibit moneylaundering and establish a Financial Intelligence Centre. Under the Act,a person commits the offence of money laundering if they knowinglyconvert, conceal, disguise, transfer, take possession of, or use propertyforming part of the proceeds of unlawful activity.

Year Keydevelopments2004 The BankingAct 2004 (Act 673) replaced the bankingLaw1989 (PNDCL225)2006 Secondary deposits reserves requirement (15%) was abolished

2006 Foreign Exchange Act 2006 (Act 723) and Whistle Blowers Act 2006 (Act 720) came intoeffect

2007Credit Reporting Act 2007 (Act 726) and Banking (Amendment) Act 2007 (Act 738) werepassed

2007 National Reconstruction Levy was abolished2007 Re-denomination of the Cedi (¢10,000=GH¢1)

2008Borrowers and Lenders Act, 2008 (Act 773), Non-Banking Financial Institutions Act, 2008(Act 774), Home Mortgage FinanceAct, 2008 (Act 770) andAnti-money laudering Act, 2008(Act749) were passed.

2008 Banks tocomplywith International Financial ReportingStandards (IFRS)



Quartile analysis

Quartile groupingFor a reasonable analysis and comparison,participating banks have been grouped intoquartiles based on size of operating assets. Weconsider a bank’s operating assets to be the keydriver in value creation for stakeholders.

At the industry level, total operating assetsincreased by 40%,from GH¢7 billion in 2007 toGH¢ 9.57 billion in 2008. Cash assets had thehighest growth rate of about 50%. This is notsurprising in times of unfavourablemacroeconomic conditions. Banks are reluctantto lend and credit conditions are furthertightened because credit risk is perceived to behigher.

With the licensing of credit referencing bureaux,credit conditions may ease because banks canobtain useful information to objectively evaluateborrowers.

We have shown in the next few pages, asnapshot of changes in quartile arrangementsand industry operating assets rankings.


The industry’s operating assets grew by 40% (but real growth was 18%) from the end of2007. Cash assets had the highest growth rate of about 50%


22

Growth in operating assets

0% 20% 40% 60%

Cash assets

Liquid Assets

Net loans and advances

Other operating assets

Total operating assetsTotal operating assets



Liquid Assets

Cash assets

composition of operating assets

0% 10% 20% 30% 40% 50% 60%

Cash assets

Liquid Assets



2007

2008



GTB, IBG,ZBL and UBA more than doubled their operating assets …….but GCB stillled the league table

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2007 (I)- restated on adoption of IFRS

Total operating assets(Thousands of Ghana Cedis)

2008 2007(I) Δ% Rank (2008) Rank (2007(I)) Quartile(2008) Quartile(2007(I)) CrossoverGCB 1,578,491 1,093,864 44% 1 1 1 1 NONEBBGL 1,275,904 1,090,078 17% 2 2 1 1 NONESCB 887,191 730,913 21% 3 3 1 1 NONEEBG 793,793 604,862 31% 4 4 1 1 NONEADB 529,342 394,208 34% 5 6 1 1 NONEStanbic 441,744 346,180 28% 6 8 1 2 UPMBG 418,582 443,711 -6% 7 5 2 1 DOW NSG-SSB 410,692 390,220 5% 8 7 2 2 NONEZBL 368,296 140,045 163% 9 16 2 3 UPHFC 364,677 155,036 135% 10 13 2 3 UPFAMBL 360,506 159,138 127% 11 12 2 3 UPCAL 314,540 219,799 43% 12 10 2 2 NONEIBG 267,719 85,429 213% 13 18 3 4 UPABL 261,868 140,467 86% 14 15 3 3 NONEPBL 260,768 229,023 14% 15 9 3 2 DOW NTTB 243,601 205,504 19% 16 11 3 2 DOW NFidelity 213,417 142,826 17% 17 14 3 3 NONEUBA 182,134 86,575 110% 18 17 3 3 NONEGTB 159,820 34,393 365% 19 21 4 4 NONEICB 95,520 73,881 29% 20 19 4 4 NONEUGL 90,822 56,915 60% 21 20 4 4 NONEUTB 37,526 24,005 56% 22 22 4 4 NONEBaroda 10,598 - n/a 23 23 4 4 NONENIB - - - 24 23 4 4 NONEBSIC - - - 24 23 4 4 NONE

Industry 9,567,552 6,847,072

Quartile analysis; the game of trading places …

First Quartilegroup (Q1)

• The value of Q1 operating assets grew from GH¢4.26 billion (2007) to GH¢5.51 billion in 2008• The number of Q1 banks remained at six from 2007. Stanbic – joined the ranks of the

industry’s “top” quartile banks. MBG exited to Q2.• GCB led the group, holding 16% of the industry’s total operating assets.

Second Quartilegroup (Q2)

• Q2 operating assets grew from GH¢1.1 billion (2007) to GH¢2.24 billion in 2008.• Q2 banks increased in number from five to six between 2007 to 2008. Three Q3 banks

entered; ZBL, HFC and FAMBL. PBL and TTB exited into Q3; and one Q1, MBG, bank joined• MBG was the only bank which recorded a decline in operating assets, by 6%.

Third Quartilegroup (Q3)

• Q3 operating assets grew by 61% from GH¢0.89 billion to GH¢1.43 billion.• Q3 banks similarly increased from five to six. IBG exited into Q2 with a remarkable growth of

over 200%; TTB and PBL fell from Q2 to join the group; whiles ABL, Fidelity and UBAmaintained their membership in the group from 2007.

Fourth Quartilegroup (Q4)

• Except for GTB whose operating assets more than tripled from 2007 to 2008, Q4 banks’operating assets had modest growth, between 29% to 56%.

• There were no movement in the number and composition of Q4 banks.• The “newest kid on the block”- Baroda- made its debut in this group



24

GCB and BBGL competed for the group’s deposits top position but GCB still heldsupreme in net advances….SCB, EBG and Stanbic were converging on returns andmargins but BBGL seems out of step within the group.

25

First Quartile Banks - Share of industry deposits

0%

5%

10%

15%

20%

GCB BBGL SCB EBG ADB Stanbic

2008 2007(I)

First Quartile Banks - Share of industry advances

0%

5%

10%

15%

20%

25%


2008 2007(I)

First Quartile Banks - Return on equity

-10%

0%

10%

20%

30%

40%

50%


2008 2007(I)

First Quartile Banks - Profit before tax margin

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%


2008 2007(I)

First Quartile Banks



BBGL’s asset quality deteriorated considerably over the year. Generally, the groupappears to be struggling in managing cost.

26

First Quartile Banks - Impairment allowance/grossloans and advances

0%2%4%6%8%

10%12%14%


2008 2007(I)

First Quartile Banks - Cost income ratio

0%

20%

40%

60%

80%

100%


2008 2007(I)

First Quartile Banks



ZBL and MBG obviously seem to have found their rhythm, with margins improving fromabout 5% (2007) to about 40% (2008). The fight for the top position within the groupgrew among MBG, SG-SSB, ZBL and FAMBL.

27

Second Quartile Banks - Share of industry deposits

0%1%2%3%4%5%6%7%

MBG SG-SSB ZBL HFC FAMBL CAL

2008 2007(I)

Second Quartile Banks - Return on equity

0%

10%

20%

30%

40%

50%


2008 2007(I)

Second Quartile Banks - Share of industry advances

0%

2%

4%

6%

8%

10%


2008 2007(I)

MBG’s ROE for 2007 is almost zero

Second Quartile Banks

Second Quartile Banks - Profit before tax margin

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%


2008 2007(I)



Except for MBG, asset quality improved for Q2 banks, with FAMBL leading; but itscosts-income ratio did not improve

28

Second Quartile Banks - Impairment allowance/grossloans and advances

0%

5%

10%

15%

20%


2008 2007(I)

Second Quartile Banks - Cost income ratio

0%

20%

40%

60%

80%

100%


2008 2007(I)

Second Quartile Banks



UBA experienced significant decline in margins and returns….. among the group IBGmade the most gains in terms of share of industry deposits and advances

29

IBG’s ROE for 2007 is almost zeroIBG’s PBT margin for 2007 is almost zero

Third Quartile Banks


Third Quartile - Profit before tax margin

-80%

-60%

-40%

-20%

0%

20%

40%

60%

IBG ABL PBL TTB Fidelity UBA

2008 2007(I)

Third Quartile Banks - Return on equity

-80%

-60%

-40%

-20%

0%

20%

40%

60%


2008 2007(I)

Third Quartile Banks - Share of industry advances

0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%


2008 2007(I)

Third Quartile Banks - Share of industry deposits

0.0%

1.0%

2.0%

3.0%

4.0%


2008 2007(I)


Quality of loan book worsened for the group’s two new entrants - PBL and TTB…..UBA’s costs to income ratio worsened

30

UBA’s Impairment allowance/gross loans andadvances is not available

Third Quartile Banks


Third Quartile Banks - Impairment allowance/grossloans and advances

0%

1%

2%

3%

4%

5%

6%


2008 2007(I)

Third Quartile Banks - Cost income ratio

0%

50%

100%

150%

200%


2008 2007(I)


Baroda appears to have found the blue print for higher margins quite early; highimpairment charges and operational costs dragged UTB to a loss position

31

Fourth Quartile Banks


Fourth Quartile Banks - Profit before tax margin

-80%-60%-40%-20%

0%20%40%60%80%

GTB ICB UGL UTB Baroda

2008 2007(I)

Fourth Quartile Banks - Return on equity

-40%

-20%

0%

20%

40%

60%

80%


2008 2007(I)

Fourth Quartile Banks - Share of industry advances

0.0%0.2%0.4%0.6%0.8%1.0%1.2%1.4%


2008 2007(I)

Fourth Quartile Banks - Share of industry deposits

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%


2008 2007(I)


The group made a marginal improvement in its asset quality and cost management butUTB and GTB are worth mentioning for limiting loan losses and managing costsrespectively

32

Fourth Quartile Banks


Fourth Quartile Banks - Impairment allowance/grossloans and advances

0%

5%

10%

15%

20%

25%

30%


2008 2007(I)

Fourth Quartile Banks - Cost income ratio

0%

50%

100%

150%

200%


2008 2007(I)


Market share analysis

Industry’s total assets grew by 40% between 2007 and 2008; ZBL, IBG and FAMBL werethe biggest gainers

Share of industry’s total assetsGCB and BBGL collectively hold 29.4%of the industry’s assets. The pair seemto be playing “catch me if you can” asthey continue to jostle each other forthe top spot.

In 2008, the two top banks – GCB andBBGL lost part of their market shares.That of BBGL was largely due to thehuge impairment charges recorded forthe year, which eroded the loans andadvances component of its operatingassets.

The competition even robbed smallerbanks like PBL (Q3) and ICB (Q4) oftheir previous year’s market shares.

Most of the industry’s gainers were 2nd

Quartile banks; ZBL, FAMB and CAL.



34

Share of industry total assets

GCB 20.1% 1 20.2% 1 19.2% 1BBGL 13.3% 2 17.2% 2 16.5% 2SCB 8.5% 3 7.7% 4 7.4% 4EBG 7.3% 4 7.8% 3 7.4% 5ADB 6.8% 5 6.2% 6 5.8% 6MBG 5.7% 6 7.6% 5 7.6% 3SG-SSB 5.3% 7 5.7% 7 5.5% 7Stanbic 4.5% 8 5.3% 8 5.0% 8CAL 3.5% 9 3.1% 10 2.9% 11IBG 3.2% 10 1.0% 17 0.9% 18FAMBL 3.2% 11 1.8% 14 1.8% 15TTB 3.0% 12 2.9% 11 2.8% 12PBL 2.9% 13 3.1% 9 3.0% 10HFC 2.6% 14 2.8% 12 2.6% 13ZBL 2.5% 15 1.7% 15 1.7% 16ABL 2.2% 16 1.9% 13 1.8% 14Fidelity 1.6% 17 0.9% 18 0.9% 19UGL 1.2% 18 1.0% 16 1.0% 17GTB 0.8% 19 0.3% 21 0.3% 22UBA 0.7% 20 0.8% 19 N/A N/AICB 0.6% 21 0.7% 20 0.6% 20UTB 0.5% 22 0.3% 22 0.3% 21Baroda 0.0% 23 N/A N/A N/A N/ANIB N/A N/A N/A N/A 5.0% 9BSIC N/A N/A N/A N/A N/A N/A

Industry 100.0% 100.0% 100.0%

Bank 2008 R 2007(i) R 2007 R

BBGL, GCB, SCB and EBG continue to hold a large part of the industry’s deposits….with their total deposits constituting about 50% of the industry’s total deposits

BBGL continued to hold the largestshare of industry deposits in 2008although it lost part of its previous year’sshare of the industry’s deposits.

GCB’s total deposits grew by 25% butthe bank lost some of its market sharedespite maintaining the second position.In 2008, GCB’s savings account had thefastest growth of 73%; current accountgrew by 28%, time & fixed deposits fellby 21%.

SCB, with only 19 branches held thirdposition on the league table in terms ofdeposits. Similar to the other big banks,a significant amount of its deposit is heldin current accounts.

The slower pace of growth in time andfixed deposits across the industry can beattributed to the attractive risk freerelatively high treasury bill rate offeredduring the year.



35

Baroda’s position is not surprising giventhat as at December 2008, the bankhad operated for less than two yearsand had no branch network.

It seems ICB has not pursued anaggressive program to increase itsshare of the industry’s deposits, giventhe length of its existence (about 13years) and number of branches (12).

The marketing efforts of FAMBL, IBG,ZBL,GTB,ABL and UBA achieved somesuccess as they were the only bankswhich made gains in the market shareof industry deposits

Share of industry deposits

Bank 2008 R 2007(i) R 2007 RBBGL 15.7% 1 18.6% 1 18.2%GCB 14.8% 2 16.3% 2 15.9%SCB 9.9% 3 10.5% 3 10.3%EBG 8.8% 4 8.9% 4 8.3%Stanbic 4.9% 5 4.8% 8 4.7%ZBL 4.4% 6 2.6% 11 2.5%FAMBL 4.4% 7 1.8% 15 1.8%ADB 4.2% 8 4.9% 7 4.8%MBG 4.2% 9 5.8% 5 5.7%SG-SSB 3.9% 10 5.1% 6 5.0%IBG 3.5% 11 1.5% 18 1.5%ABL 3.4% 12 2.3% 12 2.2%PBL 2.6% 13 3.2% 9 3.2%UBA 2.5% 14 1.6% 16 N/ATTB 2.3% 15 2.8% 10 2.7%CAL 2.3% 16 2.3% 13 2.2%Fidelity 2.1% 17 2.2% 14 2.3%GTB 2.1% 18 0.6% 21 0.6%HFC 1.4% 19 1.5% 17 1.5%UGL 1.2% 20 1.0% 20 1.0%ICB 1.0% 21 1.1% 19 1.1%UTB 0.3% 22 0.4% 22 0.4%Baroda 0.0% 23 N/A N/A N/ANIB N/A N/A N/A N/A 4.3%BSIC N/A N/A N/A N/A N/A

Industry 100.0% 100.0% 100.0%

Amidst the global financial crisis, the industry’s loans and advances still grewconsiderably………

The industry’s gross loans and advancesgrew by 47% from 2007 to 2008 with asignificant chunk going into the commerceand finance sector.

The maturity profiles of assets andliabilities of the industry’s players indicatethat banks are diversifying lending intolonger term risk assets, having maturityperiods beyond one year, perhaps asresult of the surge in the development ofinfrastructure projects in the country.

Three key factors contributing towardsthe growth are;

1. Increase in shareholders fundsIndustry’s shareholder funds increased byabout 33%, arising from increase inretained earnings and other reserves by21% and further equity capital injection,raising industry stated capital by 57%.



34

2. Increase in borrowingsBorrowings grew by 38%, increasingbanks’ capacity to finance investmentsin earning risk-assets.

3. Expansion of branch networkThe industry’s branch offices increasedfrom 530 at the start of 2008 to 665 bythe end of 2008. Alongside the branchexpansion program was also theexpansion of sales points andinvestments in technology platformswhich all played significant role inattracting deposits.

GCB maintained its 20% share of theindustry’s loans and advances in 2008.Its lead ranking can be attributed to thefunds available from growth in depositsmobilised and an expansion in itsbranch network from 137 in 2007 to148 in 2008. It appears GCB isleveraging on its widely spread branchnetwork across the country,relationships with governmentinstitutions and its length of existenceto lead the competition.

Share of industry advances

GCB 20.1% 1 20.2% 1 19.2% 1BBGL 13.3% 2 17.2% 2 16.5% 2SCB 8.5% 3 7.7% 4 7.4% 4EBG 7.3% 4 7.8% 3 7.4% 5ADB 6.8% 5 6.2% 6 5.8% 6MBG 5.7% 6 7.6% 5 7.6% 3SG-SSB 5.3% 7 5.7% 7 5.5% 7Stanbic 4.5% 8 5.3% 8 5.0% 8CAL 3.5% 9 3.1% 10 2.9% 11IBG 3.2% 10 1.0% 17 0.9% 18FAMBL 3.2% 11 1.8% 14 1.8% 15TTB 3.0% 12 2.9% 11 2.8% 12PBL 2.9% 13 3.1% 9 3.0% 10HFC 2.6% 14 2.8% 12 2.6% 13ZBL 2.5% 15 1.7% 15 1.7% 16ABL 2.2% 16 1.9% 13 1.8% 14Fidelity 1.6% 17 0.9% 18 0.9% 19UGL 1.2% 18 1.0% 16 1.0% 17GTB 0.8% 19 0.3% 21 0.3% 22UBA 0.7% 20 0.8% 19 N/A N/AICB 0.6% 21 0.7% 20 0.6% 20UTB 0.5% 22 0.3% 22 0.3% 21Baroda 0.0% 23 N/A N/A N/A N/ANIB N/A N/A N/A N/A 5.0% 9BSIC N/A N/A N/A N/A N/A N/A

Industry 100.0% 100.0% 100.0%

Bank 2008 R 2007(i) R 2007 R



37

…….and the “big boys” maintained their lead although their shares were eroded – IBGwas the highest beneficiary

Similar to other big banks that lost marketshare of net loans and advances, BBGLlost 4% of its share (from 16.2% in 2007 to13.4% in 2008). The bank grew its grossloan portfolio by 18% but could not sustainits quality as significant impairmentcharges wore down this gain leading to anincrease of 12% in its net loan portfolio asat 31 December 2008.

Although EBG lost less than 1% of itsmarket share of the industry’s loans, itdescended from third position in 2007 tofourth position in 2008. None of the banksgained more than two percentage pointson their previous year’s share of theindustry’s total loans and advances,except for IBG which improved its shareby 2% from 1% in 2007.

There is intense competition and banksare holding their own to maintain theirmarket share.

Profitability and efficiency

The industry’s Profit Before Tax (PBT) ratio took a dive but EBG stood head andshoulders above its peers. It was a triumphant entry for Baroda….BBGL fell from grace,whilst UTB and UBA struggled…….

Profit marginsThe industry’s PBT dropped from 30% in2007 to 26% in 2008 - a significant rise inimpairment charges and rising staff costsaccount for the decline.

Impairment charge for the year more thandoubled whiles staff cost increased by 40%.The high inflation rates coupled with theweakening cedi might account for theworsening loan default rate. Thatnotwithstanding, the industry’s net profit aftertax grew by 32%.

EBG’s top ranking resulted mainly fromsignificant transaction gains from foreigncurrency trading, which doubled over theyear. The bank was also successful incontrolling cost as it grew its business. Itscost to income ratio averaged 52%, below theindustry’s average of 63% for 2007 and 2008.

ZBL’s profit margin improved and leaped from19th in 2007 to rank 2nd in the industry in2008.



39

This was as a result of increase in foreignexchange gains and a relatively lowimpairment charge for the year.

In less than two years of operation, Barodawas able to lock in at the fourth position. Thebank derived 85% of its total income frominvestment in securities. Interest incomefrom loans is less than 10% of its totalincome indicating the bank’s low exposure tocredit risk.

BBGL, UTB and UBA were unable to recovercosts from their operations and recordedlosses in the year.

BBGL’s performance was due to thesignificant increase in impairment charge,staff cost and administrative expenses as aresult of its branch expansion network duringthe year.

Interestingly, UTB ‘s PBT ranked 1st in 2007after its 2007 figures were restated to complywith IFRS. A change in accounting rulesunder IFRS where value of collaterals isconsidered in determining impairment mayhave contributed to the improved PBT.

Profit before tax margin

EBG 41.9% 1 48.2% 3 44.6% 3ZBL 40.5% 2 3.6% 19 0.4% 21Stanbic 39.9% 3 49.9% 2 44.7% 2Baroda 39.5% 4 N/A N/A N/A N/AMBG 37.6% 5 5.1% 17 30.4% 7ICB 37.5% 6 24.6% 11 24.6% 11SCB 37.4% 7 46.6% 4 46.6% 1IBG 36.8% 8 1.2% 20 1.4% 20TTB 35.1% 9 40.6% 5 41.2% 5ABL 34.5% 10 16.6% 14 14.7% 16HFC 32.6% 11 22.1% 12 29.9% 9GTB 32.6% 12 -68.2% 22 -74.4% 22GCB 31.4% 13 31.6% 7 30.1% 8CAL 31.2% 14 29.5% 8 35.2% 6SG-SSB 30.6% 15 26.9% 9 28.4% 10PBL 24.6% 16 24.9% 10 24.3% 12FAMBL 22.5% 17 15.0% 15 18.4% 14ADB 18.3% 18 19.3% 13 18.8% 13Fidelity 17.2% 19 5.1% 18 4.2% 19UGL 12.4% 20 6.6% 16 9.5% 18BBGL -6.3% 21 36.8% 6 42.2% 4UTB -64.7% 22 67.6% 1 9.9% 17UBA -64.9% 23 -14.0% 21 N/A N/ANIB N/A N/A N/A N/A 17.7% 15BSIC N/A N/A N/A N/A N/A N/A

Industry 26.3% 30.4% 32.4%

Bank 2008 R 2007(i) R 2007 R



40

…….UTB got the handle on managing interest margin but at the expense of assetquality. Fidelity and FAMBL failed to widen the gap

Net interest margin (NIM)The industry’s NIM remained at 8%.High yield on government securities putextreme pressure on banks to offercompetitive rates to attract depositors.As a result, cost of funds increased andmost banks revised their base rates, insome cases three times during the year.

Competition within the industry set aceiling above which the base rate couldnot be pushed further, ranging between24.1% to 27.8%.

Baroda’s and UTB’s lead in ranking ispartly attributable to their relatively smallasset base. In 2008, they accounted for0.6% of the industry’s total assets.However its access to cheap retaildeposits funds from small and mediumsized enterprises and traders reducedits interest cost whilst investments inlow risk, high Government securitiesadded significantly to income.

Further, Baroda and UTB do not haveany debt service obligation as theirbusiness is wholly equity financed.

By the close of 2008, 41% of their totaldeposits were held in low interestbearing current accounts.

NIM was stable across the industry butthe competition took its toll as the netinterest margin of EBG, IBG, HFC andUBA was eroded between 2007 and2008.

FAMBL’s performance appears to be aresult of its inability to compete formuch cheaper retail deposit due to itsmerchant banking background. By theclose of 2008, 42% of its total depositsremained in its fixed deposit accountwhiles 29% stayed in current account.

Fidelity’s low NIM is mainly due to itsdebt service obligation as a result of itsshort term borrowing.

Net interest margin

Baroda 19.4% 1 N/A N/A N/A N/AUTB 11.6% 2 11.5% 2 10.6% 1TTB 10.1% 3 9.8% 3 9.5% 2UGL 9.6% 4 8.9% 7 8.8% 6SG-SSB 9.5% 5 8.8% 8 8.8% 5MBG 9.5% 6 9.0% 6 7.7% 9GCB 9.4% 7 9.4% 4 9.4% 3SCB 8.7% 8 8.6% 10 8.4% 8BBGL 8.6% 9 8.7% 9 8.7% 7Stanbic 7.5% 10 7.3% 12 7.4% 11ADB 7.2% 11 7.0% 13 7.1% 13ICB 7.1% 12 6.1% 18 6.1% 17ABL 6.6% 13 6.6% 17 6.1% 18PBL 6.6% 14 7.0% 14 7.1% 15HFC 6.1% 15 9.1% 5 8.9% 4ZBL 6.1% 16 4.7% 20 4.7% 20IBG 5.8% 17 8.5% 11 7.3% 12EBG 5.8% 18 6.6% 16 7.1% 14CAL 5.7% 19 6.1% 19 5.9% 19GTB 5.5% 20 3.2% 22 3.1% 22UBA 5.2% 21 12.8% 1 N/A N/AFidelity 3.8% 22 3.6% 21 3.6% 21FAMBL 3.7% 23 6.8% 15 6.6% 16NIB N/A N/A N/A N/A 7.5% 10BSIC N/A N/A N/A N/A N/A N/A

Industry 7.7% 7.9% 7.9%

Bank 2008 R 2007(i) R 2007 R

Returns to shareholders

The industry’s average return on equity remained constant, but shake-ups occurredwithin the industry; IBG and MBG performances were outstanding

Return on equityOver the past two years, all the threecomponents of ROE (i.e. net spreads, costefficiency and leverage) remained constantthus leading to the industry’s ROE tostagnate at 22%. However, we expect theindustry’s ROE, at least in the short-term,to fall as new capital raised by banks tomeet BOG capital requirements will notyield immediate returns.

Although banks have consistently revisedtheir base rates upwards in response tothe revision of BOG’s prime rate, cost ofborrowing has equally gone up. Netspreads has therefore remained at 6.7%and 6.9% respectively over the past twoyears.

In spite of the recent competition, theindustry’s cost to income ratio only inchedup by 1%, from 62% in 2007 to 63% in2008, probably due to the use of IT toimprove efficiency.

Industry leverage increased from 9.3times from 2007 to 9.8 times in 2008 .

.



42

IBG recorded a 46.1% ROE, more thantwice the industry average. Theshareholders injected new capital toincrease its stated capital by 60%. At thesame time returns from lending doubledto boost ROE, as loans and advancesincreased four fold.

Stanbic’s profits increased by 35% but itsranking fell from second position lastyear to 7th position, due to a widenedstated capital, of about 2.5 times that of2007.

UTB topped the 2007 ranking, but couldnot sustain it and therefore nose-dived tothe 22nd position in 2008 as it recorded aloss approximating thrice its 2007 profit.

Baroda, a new entrant into the industryrecorded a 5% ROE to outperform oldplayers such as BBGL, UTB and UBA,which recorded negative RoEs of 6%,41% and 82% respectively.

.

Return on equity

IBG 46.1% 1 -0.3% 20 1.8% 20MBG 42.5% 2 0.1% 19 24.1% 8EBG 41.6% 3 37.5% 3 44.9% 1GTB 37.7% 4 -25.6% 22 -27.9% 22SCB 37.1% 5 37.4% 4 37.4% 5TTB 32.5% 6 36.8% 5 40.8% 2Stanbic 32.2% 7 41.7% 2 39.1% 3ABL 29.2% 8 10.5% 16 7.8% 17PBL 27.6% 9 23.8% 7 28.5% 6FAMBL 26.6% 10 17.9% 10 20.5% 10Fidelity 24.5% 11 5.7% 17 4.6% 19ZBL 24.5% 12 11.3% 15 1.0% 21GCB 22.8% 13 18.6% 9 15.1% 12CAL 22.5% 14 15.6% 12 20.8% 9ICB 22.4% 15 13.0% 13 13.0% 14SG-SSB 22.3% 16 19.8% 8 19.8% 11HFC 20.8% 17 16.1% 11 24.7% 7ADB 13.7% 18 12.2% 14 10.3% 15UGL 8.4% 19 4.0% 18 9.8% 16Baroda 5.0% 20 N/A N/A N/A N/ABBGL -6.0% 21 32.2% 6 37.9% 4UTB -41.2% 22 79.2% 1 5.2% 18UBA -82.0% 23 -25.4% 21 N/A N/ANIB N/A N/A N/A N/A 13.8% 13BSIC N/A N/A N/A N/A N/A N/A

Industry 22.0% 22.2% 23.2%

Bank 2008 R 2007(i) R 2007 R

Asset quality

ICB’s loan book was the highest quality; that of BBGL went bad but UTB’s was worst …

The quality of banks’ loans and advancesdeteriorated between 2007 to 2008. Thisis however not surprising given the rateat which inflation and interest ratesincreased and the cedi depreciated in2008. Coupled with this is the increasedlending to the retail sector.

The miscellaneous segment whichincludes personal loans which grew themost as most banks focused on retailbanking as part of their growth strategy;

BBGL’s performance is veryunusual given that traditionally, ithad a high ranking in the quality ofits loan book. In 2008, itsimpairment charge to financialassets increased more than sevenfold, from a 2007 figure of GH¢5.5million to GH¢46.9 million in 2008.

UTB continues to grapple with itsloan quality even though the bankdiluted its 50 largest exposures tototal exposures from 82% in 2007 to67% in 2008. Over the year, thebank increased its loan distributionto the construction and retail sector.

The cumulative loss ratios of thefollowing banks were worse than theindustry’s average of 5% in 2008;UTB-12.2%, MBG-5.4%, BBGL-6.0%.



44

Impairment charge/ gross loans and advances

Loan distribution 2007 2008

Commerce & finance 35% 35%Miscellaneous 16% 21%Services 17% 16%Manufacturing 12% 11%Construction 6% 5%

Agriculture, forestry &fishing 5% 4%

Transport, storage &communication 4% 3%Mining & quarrying 2% 2%Electricity, gas & water 3% 2%Housing 1% 1%Total 100% 100%

Bank 2008 R 2007(i) R 2007 RICB 0.1% 1 1.4% 12 1.4% 13Fidelity 0.1% 2 1.5% 13 1.3% 9SCB 0.4% 3 0.6% 5 0.6% 1PBL 0.4% 4 1.6% 14 1.9% 15UGL 0.4% 5 1.6% 15 1.4% 10GCB 0.8% 6 0.1% 2 1.1% 5ZBL 0.9% 7 1.3% 8 1.3% 8CAL 1.1% 8 1.4% 9 0.9% 3FAMBL 1.1% 9 5.3% 20 4.4% 22ABL 1.1% 10 2.1% 17 2.1% 16EBG 1.4% 11 0.2% 3 1.2% 7HFC 1.6% 12 1.1% 7 1.4% 12ADB 1.7% 13 1.4% 11 1.2% 6IBG 1.7% 14 3.3% 19 3.1% 20Stanbic 1.8% 15 0.3% 4 1.1% 4GTB 2.0% 16 1.4% 10 2.9% 18SG-SSB 2.1% 17 2.4% 18 1.4% 11Baroda 2.5% 18 N/A N/A N/A N/ATTB 2.7% 19 1.7% 16 1.5% 14UBA 3.2% 20 6.0% 21 N/A N/AMBG 5.4% 21 8.0% 22 3.2% 21BBGL 6.0% 22 0.8% 6 0.8% 2UTB 12.2% 23 -18.9% 1 2.9% 17BSIC N/A N/A N/A N/A N/A N/ANIB N/A N/A N/A N/A 3.0% 19

Industry 2.2% 1.5% 1.5%

…… however, most banks increased their loan profitability; best performers were UGL,ZBL and ICB

.



45

Overall, most banks increased their loanportfolio profitability over the year. Thebest performers were; ZBL at 20% from10% (2007); Fidelity at 13% from 5%(2007) and UGL at 22% from 14% (2007)

Impairment allowance/ gross loans and advances Loan portfolio profitability

Fidelity 0.8% 1 1.6% 5 1.5% 2GCB 1.5% 2 1.3% 1 2.3% 4ZBL 1.6% 3 1.5% 3 1.5% 1ABL 1.8% 4 3.9% 13 5.6% 12IBG 1.9% 5 3.0% 8 5.9% 14EBG 2.3% 6 1.5% 4 2.7% 6GTB 2.4% 7 1.4% 2 3.0% 7SCB 2.6% 8 3.5% 10 3.5% 9Baroda 2.8% 9 N/A N/A N/A N/AHFC 3.8% 10 3.2% 9 3.5% 8PBL 3.9% 11 3.7% 11 4.8% 11CAL 4.1% 12 4.9% 14 5.7% 13UGL 4.2% 13 6.8% 16 7.5% 17SG-SSB 5.0% 14 6.2% 15 6.2% 15TTB 5.4% 15 3.8% 12 4.1% 10Stanbic 5.5% 16 2.4% 6 2.3% 3BBGL 8.0% 17 2.6% 7 2.6% 5FAMBL 8.6% 18 17.4% 20 16.0% 21ICB 10.5% 19 9.8% 17 9.8% 18ADB 11.1% 20 13.7% 19 16.0% 20MBG 14.1% 21 10.3% 18 6.8% 16UTB 20.5% 22 30.2% 21 24.4% 22NIB N/A N/A N/A N/A 12.7% 19UBA N/A N/A N/A N/A N/A N/ABSIC N/A N/A N/A N/A N/A N/A

Industry 5.2% 4.6% 5.3%

UGL 21.5% 1 14.1% 5 13.5% 6ZBL 19.6% 2 9.7% 17 9.3% 18ICB 18.8% 3 13.3% 8 13.3% 7HFC 17.8% 4 16.7% 2 15.9% 2TTB 17.4% 5 16.5% 3 16.2% 1ABL 17.1% 6 11.3% 12 11.8% 10PBL 16.8% 7 14.0% 7 13.6% 5Stanbic 16.2% 8 11.7% 10 9.6% 15CAL 14.0% 9 14.0% 6 14.2% 4SCB 13.6% 10 14.8% 4 12.4% 8Fidelity 13.0% 11 5.4% 21 5.3% 22MBG 12.8% 12 10.2% 15 14.8% 3GCB 12.3% 13 9.8% 16 8.8% 21GTB 11.9% 14 10.6% 14 8.8% 20BBGL 11.2% 15 11.2% 13 11.2% 13IBG 10.9% 16 12.7% 9 11.0% 14ADB 10.1% 17 9.2% 19 9.4% 17SG-SSB 9.9% 18 8.5% 20 9.6% 16EBG 9.4% 19 9.3% 18 9.1% 19FAMBL 7.9% 20 11.3% 11 12.0% 9Baroda 6.4% 21 N/A N/A N/A N/AUTB 4.1% 22 36.2% 1 11.6% 12UBA -3.2% 23 -6.0% 22 N/A N/ANIB N/A N/A N/A N/A 11.7% 11BSIC N/A N/A N/A N/A N/A N/A

Industry 12.6% 11.1% 11.1%

Bank 2008 R 2007(i) R 2007 R Bank 2008 R 2007(i) R 2007 R

Liquidity

Overall, the industry liquid assets todeposits ratio fell marginally from 0.55 in2007 to 0.53 in 2008, indicating that banksdid not significantly change their strategyin response to the global ‘credit crunch’.

Baroda appears to have taken a veryconservative approach to lending; or“testing the waters” before investing inmore risky assets. By the close of 2008, itsentire deposits together with less than10% of its capital were held in liquid funds.

HFC’s high ratio is attributable to theproceeds from its rights issue concluded in2008. The bank raised GH¢10 million fromthe rights issue.

SG-SSB and UTB had the highest drop inliquid assets to total deposits ratio for2008. These two banks appeared to bemore willing to take on risks by lending,rather than placing funds in less riskyassets.



The industry’s liquidity fell marginally….

47

UGL for another year running had thelowest liquid assets to total depositsratio, suggesting a continued strategy tobuild its loan book. The bank’s industryshare of total loans and advancesremained at 1%.

The top two banks in the first quartilecategory, GCB and BBGL continued tohave less than 45% of their deposits inthe less risky assets as they pursuedinvestments with higher returns.

Liquid funds/ total deposits

Baroda 2.89 1 0.00 23 0.00 23HFC 2.01 2 0.57 15 0.57 14ICB 0.84 3 0.74 5 0.73 5F idelity 0.80 4 0.86 2 0.79 3UBA 0.78 5 0.63 9 0.00 23G TB 0.75 6 0.63 10 0.64 8CAL 0.70 7 0.84 3 0.85 2ZBL 0.69 8 0.54 16 0.55 15EBG 0.58 9 0.62 12 0.66 7SC B 0.55 11 0.75 4 0.75 4PBL 0.53 12 0.63 8 0.63 10ABL 0.52 13 0.53 17 0.52 16AD B 0.47 14 0.58 13 0.58 13Stanbic 0.46 15 0.49 18 0.43 18BBG L 0.44 16 0.43 20 0.43 19G CB 0.43 17 0.38 21 0.38 21TTB 0.43 18 0.63 11 0.63 11SG -SSB 0.41 19 0.63 7 0.63 9UTB 0.41 20 0.68 6 0.68 6IBG 0.35 21 0.58 14 0.58 12MBG 0.32 22 0.47 19 0.47 17UG L 0.28 23 0.32 22 0.32 22FAM BL 0.57 10 0.90 1 0.89 1NIB 0.00 24 0.00 23 0.39 20BSIC 0.00 24 0.00 23 0.00 23

Industry 0.53 0.55 0.54

Bank 2008 R 2007(i) R 2007 R

Capital structure andfinancial risk

The industry’s leverage increased sharply in 2008…….. BOG’s directive for banks toincrease capital might save the situation

The industry generally experienced anincrease in financial leverage. Tenbanks increased their financial leveragefrom 2007; some marginally (EBG, UTB,ABL) and few others (FAMBL, Fidelity,IBG ) quite considerably.

As previously mentioned the industry’snet loans and advances grewconsiderably in spite of the globalfinancial crisis. The industry’s equityalso grew (by 33%) over the sameperiod as banks work towards meetingBOG’s minimum capital requirement.

FAMBL, PBL and Fidelity were the mostleveraged banks due to the increase inthe size of their loan books, perhaps inefforts to increase their market share ofloans and advances.

BBGL, ZBL, IBG injected additionalcapital in 2008 towards achieving theminimum capital requirement.

.



ADB and MBG on the other handincreased their stated capital by GH¢30million and GH¢18 million respectivelythrough capitalising income surpluses.

GCB is currently capitalised at GH¢72million well above the minimumrequirement. BOG’s directive to banksto further increase their stated capital istimely and could help reduce the risk ofover-leveraging.

Net loans and advances / equity

Bank 2008 R 2007(i) R 2007 RFAMBL 17.46 1 7.92 5 6.91 5PBL 9.84 2 9.97 2 10.12 1Fidelity 9.12 3 4.92 11 5.14 10IBG 7.48 4 5.22 8 5.11 11BBGL 5.84 5 6.78 7 6.69 6MBG 5.69 6 7.98 3 6.60 7TTB 5.51 7 4.95 10 5.42 9CAL 5.39 8 3.79 15 3.94 16GCB 5.33 9 4.32 14 4.51 14Stanbic 5.28 10 7.47 6 7.81 4HFC 5.19 11 7.97 4 7.88 3SCB 5.15 12 3.25 17 3.25 18ABL 5.08 13 4.72 13 5.06 12EBG 4.90 14 4.75 12 6.46 8UBA 4.77 15 5.05 9 N/A N/AGTB 4.14 16 2.07 22 2.05 21SG-SSB 4.12 17 3.64 16 3.64 17UGL 3.74 18 2.95 18 4.55 13ZBL 3.53 19 11.85 1 9.16 2ADB 3.41 20 2.42 20 2.48 19UTB 2.93 21 2.74 19 1.92 22ICB 2.12 22 2.14 21 2.14 20Baroda 0.15 23 0.00 23 0.00 23NIB N/A N/A N/A N/A 4.48 15BSIC N/A N/A N/A N/A N/A N/A

Industry 5.13 4.69 4.82

Glossary of key financial terms, equations and ratios

Capital adequacy ratio is the ratio of adjusted equity base to risk adjusted asset base as required by the Bank of Ghana (BoG)

Cash assets includes cash on hand, balances with the central bank, money at call or short notice, and cheques in course of collection and clearing

Cash ratio = (Total cash assets + Total liquid assets) ¸ (Total assets - Net book value of fixed assets - Investments in subsidiaries and associated companies)

Cash tax rate = Actual tax paid ¸ Net operating income

Cost income ratio = Non-interest operating expenses ¸ Operating income

Current ratio = (Total assets - Net book value of fixed assets – Investments in subsidiaries and associated companies) ¸ (Total liabilities - Long term borrowings)

Dividend payout ratio = Proposed dividends ¸ Net profit

Dividend per share = Proposed dividends ¸ Number of ordinary shares outstanding

Earnings per share = After tax profits before proposed profits ¸ Number of ordinary shares outstanding

Financial leverage ratio = Total assets ¸ common equity

Liquid assets includes cash assets and assets that are relatively easier to convert to cash, e.g., investments in government securities, quoted and unquoted debt and equity investments, equityinvestments in subsidiaries and associated companiesLoan loss provisions = (General and specific provisions for bad debts + Interest in suspense) ¸ Gross loans and advances

Loan portfolio profitability = (Interest income attributable to advances - Provisions for bad and doubtful loans) ¸ Net loans and advances

Loan loss rate = Bad debt provisions ¸ Average operating assets

Net book value per share = Total shareholder's funds ¸ Number of ordinary shares outstanding

Net interest income = Total interest income - Total interest expense

Net interest margin = Net interest income ¸ Average operating assets

Net operating income = Total operating income - Total non-interest operating expenses + Depreciation and amortisation - Loan loss adjustment + Exceptional credits

Net operating (or intermediation) margin = [(Total interest income + Total non-interest operating revenue) ¸ Total operating assets] - [Total interest expense ¸ Total interest-bearing liabilities]

Net profit = Profit before tax - Income tax expense

Net spread = (Interest income from advances ¸ Net loans and advances) - (Interest expense on deposits ¸ Total deposits)

Non-interest operating expenses include employee related expenses, occupancy charges or rent, depreciation and amortisation, directors emoluments, fees for professional advice andservices, publicity and marketing expensesNon-interest operating revenue includes commissions and fees, profit on exchange, dividends from investments and other non-interest investment income, and bank and service charges

Non-operating assets comprises net book value of fixed assets (e.g., landed property, information technology infrastructure, furniture and equipment, vehicles) and other assets, includingprepayments, sundry debtors and accounts receivableOperating assets include cash and liquid assets, loans and advances, and any other asset that directly generates interest or fee income

Operating income = Net interest income + Non-interest operating revenue

Profit after tax margin = Profit after tax ¸ Total operating income

Profit before tax margin = Profit after extraordinary items but before tax ¸ Total operating income

Quick (acid test) ratio = (Total cash assets + Total liquid assets) ¸ (Total liabilities - Long term borrowings)

Return on assets = Profit after tax ¸ Average total assets

Return on equity = Profit after tax ¸ Average total shareholders' funds

Shareholders' funds comprise paid-up stated capital, income surplus, statutory reserves, capital surplus or revaluation reserves

Total assets = Total operating assets + Total non-operating assets

Total debt ratio = Total liabilities ¸ Total assets

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Our profile


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Worldwide, PricewaterhouseCoopers provides industry-focusedassurance, tax, and advisory services to build public trust andenhance value for its clients and their stakeholders. More than155,000 people in 153 countries across our network share theirthinking, experience and solutions to develop fresh perspectivesand practical advice.

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Our clients include the most prominent private sector businesses– both multinational and national; most government institutions –at national and local levels; and the major international financialinstitutions.

From Ghana, the firm services clients located in or with businessand development interests in Sierra Leone, Liberia, and TheGambia.

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For instance, we have advised on public sector institutionalrestructuring and organisational development, public sectorreform, liberalisation and privatisation of utilities andinfrastructure sectors, liberalisation of financial markets, andmodernisation of tax, customs and exchange control regimes.



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© 2009 PricewaterhouseCoopers Inc. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separateand independent legal entity. PricewaterhouseCoopers Inc. is an authorised financial services provider.*connectedthinking is a trademark of PricewaterhouseCoopers LLP.

PRICEWATERHOUSECOOPERS GHANA

COUNTRY LEADERCharles A Egan Partner (Direct Line: 761611) – [email protected]

ASSURANCEMark J Appleby Partner (Direct Line: 761623) – [email protected] Asiedu-Antwi Partner (Direct Line: 761533) – [email protected] Amuii Director – [email protected]

Sarah-Mary Frimpong Senior Manager – [email protected] Karanja Senior Manager – [email protected] Darkwa Senior Manager – [email protected]

ADVISORYFelix E Addo Partner (Direct Line 761355) – [email protected] Ashiagbor Partner (Direct Line 761465) – [email protected] Tamattey Partner – [email protected] Nipah Associate Director – [email protected] Anyane-Yeboa Associate Director – [email protected]

SYSTEMS PROCESS ASSURANCEDavid Brocke Senior Manager – [email protected]

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Contact us (www.pwc.com/gh)

GHANA ASSOCIATION OF BANKERS

Dan MensahExecutive Secretary4th Floor, SSNIT Tower Block(Near Pension House) AccraP O Box 41, Accra, GhanaPhone: +233 (21) 670629Telefax: +233 (21) 667138Email: [email protected]

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Documents

Ghana Banking Survey - pwc.com · UT Bank Limited 1995 Local 9 Prince K. Amoabeng CAL Bank Limited* 1990 Local 13 Frank Adu Jr. Ecobank Ghana Limited* 1990 Foreign 44 Samuel Ashitey