Shareholders of GCB Bank have voted overwhelmingly to allow the bank to raise up to GH¢1billion in additional equity capital, comprising GH¢750million in Common Equity Tier 1 Capital and GH¢250million in additional Tier 1 Capital through preference shares.
The injection will primarily be used to meet regulatory capital adequacy ratio requirements, enhance deal-making capacity and take advantage of opportunities in the market. It will also support targeted investment in digital transformation and drive its business strategy, the bank said.
During the bank’s annual general meeting (AGM), Managing Director Kofi Adomako expressed his appreciation for the resounding support shown by the shareholders, considering the challenging operating conditions. He emphasised that the shareholders’ decision to invest in the bank was a strong vote of confidence in its management and board, particularly during a difficult period for the financial industry.
Mr. Adomako acknowledged the current economic climate and recognised the significance of strengthening the bank and restoring it to its previous position. He highlighted that GCB Bank is not simply seeking capital for indigenous banks, but rather aiming to contribute to overall economic development.
“It is a difficult time, I must admit; and what our shareholders have done is that they have shown and made a vote of confidence in the bank, its management and board. It is not the easiest time for anyone to deepen investment in any financial institution at this point in time. We got resounding support and we appreciate them,” he said.
The GCB boss clarified that the bank is not seeking special favors, but capital as an indigenous bank, which is a prerequisite for economic development.
“All around us, capital sits with the indigenous banks and it is the indigenous banks… GCB needs to be supported. We are not asking to be favored and that is why our shareholders have done what they have done. They have because they see the potential in GCB Bank,” he added.
This comes as the lender is seeking to enhance its capacity to meet obligations. The bank plans to increase its CAR from 7.59 percent in December 2022 to 14 percent by the end of this year.
The decline in the bank’s CAR was primarily due to its participation in the Domestic Debt Exchange Programme (DDEP). This restructuring resulted in impairment losses and capital adequacy challenges for the bank.
Additionally, GCB aims to achieve a CAR of 18 percent by the end of 2025, surpassing the Bank of Ghana’s current regulatory floor of 13 percent.
Positive start to 2023
Already, in the first quarter of 2023, the bank’s pre-profit for the period soared to GH¢301.5million, a 32 percent increase over the GH¢228.5million recorded in the first accounting period of 2022. This was driven primarily by growth in interest income and net trading income, which propelled operating income to GH¢900million, versus GH¢655.5million in the comparable period from the previous year.
Following the same tangent, the bank’s assets grew by 19.46 percent from GH¢20.2billion in the first quarter of 2022 to GH¢24.1billion in the same period this year. The development was attributed to a 34.7 percent and 26.73 percent appreciation in cash and its equivalents, as well as loans and advances to businesses and households, respectively.
Despite this, Mr. Adomako called for calm, saying the economy and the industry needed “time to heal”.
“We had already taken into consideration the need for additional restructuring of some domestic instruments and we would not be impacted materially,” he added.
Review of 2022
In the year under review, GCB Bank grew its total assets, increasing from GH¢18.4billion in 2021 to GH¢21.5billion. One of the key drivers of this growth was the significant increase in net trading income, which rose by 209 percent. This boost was largely attributed to favourable margins from foreign exchange trading driven by currency volatility.
Additionally, the bank’s net interest income contributed 70 percent of its total revenue, while non-interest income accounted for the remaining 30 percent. In the 2022 review year, GCB Bank witnessed a 24 percent growth in total operating income, reaching GH¢3billion compared to GH¢2.45billion in 2021.
Customer deposits also saw substantial growth, increasing by 28 percent from GH¢13.9billion in 2021 to GH¢17.8billion in 2022. Furthermore, total loans and advances grew by 27 percent, from GH¢4.3billion to GH¢5.5billion in 2022.
However, due to the exchange of GH¢6.784billion worth of eligible bonds under the DDEP, the bank recorded an impairment loss of GH¢1.8billion for the year. As a result, GCB Bank reported a loss before tax of GH¢743.5million in 2022, compared to a profit before tax of GH¢832million in the previous year. Without this loss, the bank was projected to achieve a profit of GH¢1billion.
During the event, the Board Chair of GCB Bank, Jude Kofi Arthur, emphasised the bank’s commitment to the country’s well-being. He stated that the bank evaluated and concluded that participating in the DDEP was in the best interest of the bank.
Mr. Arthur also highlighted the bank’s focus on increasing non-funded income and minimizing operational costs. Rebuilding capital, strengthening liquidity, and enhancing earnings generation, especially from non-funded sources, are among the bank’s immediate priorities.