Consolidated Bank Ghana, the state owned universal bank established in August last year out of the consolidation of five liquidated indigenous banks – to which another two were added in January this year – has turned the corner and is now on a financial footing that is sound enough to attract foreign private investment into its finances.
The bank is currently in the final stages of negotiations with a yet undisclosed foreign financial institution for the monetization of the second tranche of the GHc7.6 billion in special resolution bonds issued on its behalf by government in August last year. The bonds were issued to bridge the capital gap between liabilities and good assets it inherited through its establishment out of Unibank, The Royal Bank, Construction Bank, Sovereign Bank and The Beige Bank.
The second tranche of that bond issuance, amounting to GHc4.4 billion will become available for CBG’s use following the impending completion of the ongoing negotiations which are now in their final stages. Instructively, the Bank of Ghana itself, which monetized the first tranche of the issuance in August last year, to the tune of GHc3.2 billion is now considering offloading the bonds to private third party investors in a market driven transaction to free up its own balance sheet. That the central bank could even consider this is further proof of CBG’s established financial solidity.
Indeed, Goldstreet Business has learnt that after the initial few months following the bank’s establishment when lack of confidence in its prospects by the banking public led to net withdrawals from its deposit base, the situation has now stabilized and its deposits have started to grow.
The impending monetization of the second tranche of special resolution bonds issued by the government could make CBG one of the most liquid banks in the country. Importantly, it has a third tranche of bonds to fall back on as well, worth GHc1.5 billion, these having been issued in January this year by government to cover the capital deficits of Premium Bank and Heritage Bank respectively, which CBG took over through a purchase and assumption agreement at the start of the year. It can also count to some extent on recoveries of doubtful loans given by its composite banks. Indeed, the loan portfolios of the two failed banks consequently taken over by GCB Bank in August 2017 – UT Bank and Capital Bank – have generated loan recoveries of some GHc480 million since then.
CBG was established last year with GHc450 million in tier one equity capital making it one of the first banks to exceed the new minimum capital requirement of GHc450 million set by the BoG.
Because it comprised an amalgamation of five capital deficient banks, public confidence in its prospects was low despite its having the third largest balance sheet in Ghana’s banking industry and what is now the second widest branch network, comprising over 190 branches spread across all the regions of the country. However, while the bank has opened several branches on its own accord since its establishment it now intends to close some of its erstwhile branches either because they are poorly located or they are too close to each other.
The bank is prudently focusing heavily on SMEs and retail banking where it can leverage the most on its geographical reach and its indigenous identity. However it also has strong capabilities in corporate banking as well.