The government has abandoned its plans to merge the Agricultural Development Bank (ADB) and the National Investment Bank (NIB) into the proposed National Development Bank (NDB).
The move is intended to pave the way for each of the banks to recapitalise and revamp its operations.
The Daily Graphic is reliably informed that the merger was cancelled in October at the behest of President Nana Addo Dankwa Akufo-Addo.
The President is said to have expressed the government’s commitment to resource the two banks individually to enable them to play their traditional roles of stimulating investments in the manufacturing sector and transforming agriculture and agro-processing through strategic lending.
The gesture is in line with the government’s agenda of economic transformation through industrialisation and increased investments in agriculture and agro-processing .
Consequently, the Daily Graphic has learnt that the government, through the Ministry of Finance, will formally announce the cancellation of the merger in the coming days to pave the way for the banks to use different methods to bolster their respective stated capitals to GH¢400 million by December 31.
In an interview with the Daily Graphic on December 8, the Managing Director of ADB, Dr John Kofi Mensah, confirmed the cancellation of the merger but said discussions were ongoing on how to recapitalise the bank.
“It is sure that we will meet our capital requirement before the deadline ends,” he said.
The capital raising exercises are needed to ensure that the two banks, which are largely owned by the state, meet the Bank of Ghana’s (BoG) new minimum capital requirement of GH¢400 million before the year ends.
According to the financial statements of the two banks, ADB and NIB have GH¢275.1 million and GH¢70 million respectively as stated capital.
This means that the government and the BoG will need almost GH¢500 million to recapitalise the two banks to the new level of GH¢400 million.
ADB’s capital plans
More than 92 per cent of the ADB, which is listed on the Ghana Stock Exchange (GSE), is owned by the government and the BoG through its subsidiary, the Financial Investment Trust Limited (FIT), leaving the remainder for retail investors and staff of the bank.
The ADB’s two major shareholders are now in discussions on how to plug the capital deficit.
Dr Mensah, however, did not mention the exact amount involved nor the method to be used to raise the money except to say the process would involve the minority shareholders.
When asked if the bank would consider a rights issue — the sale of shares on discount to existing shareholders — Dr Mensah said: “No. I think the major shareholders have decided to put in the money. However, we will need the consent of the small shareholders and that is what we are working on.”
A source close to the bank’s capital raising exercise told the Daily Graphic that the BoG and the government were looking at raising between GH¢150 million and GH¢200 million for the bank.
The amount took into account ongoing discussions aimed at cleaning the bank’s loan book, which could lead to the write-off of some bad assets, it said.
Like the ADB, the government owns about 95 per cent of NIB, leaving the rest for individual investors.
Although the management of NIB did not respond to requests for comment, the Daily Graphic is reliably informed that a similar financial package is being worked out for the bank to meet the BoG’s new capital demand before the deadline elapses.
Until recently, the ADB had gone through some boardroom wranglings that were settled this year when the BoG annulled the share purchase of four institutional investors.
The action by the central bank reverted the stakes of the four investors, totalling 51 per cent, to FIT, a subsidiary of the BoG.