Bank Owner Sees Scope for Deals as Ghana Cleans Up Its Lenders
(Bloomberg) -- One of Ghana’s biggest lenders is ready to pick over the bones of its peers should the country’s push to strengthen the industry provide opportunities to buy banking assets or make full-blown acquisitions.
The nation’s banking regulator is trying to bolster a sector beset by bad loans and poor governance, curbing the availability of credit in Africa’s third-fastest growing economy. The West African nation’s 35 licensed lenders have until the end of this year to raise their minimum capital levels more than threefold to 400 million cedis ($90 million).
The rules will result in fewer players, said Laureen Kouassi-Olsson, the regional head for central and West Africa at Amethis Finance, a private-equity firm which owns 18 percent of Accra-based Fidelity Bank Ltd. with Edmond de Rothschild group.
“We hope that even if we don’t acquire a bank in itself, we can acquire some assets,” Kouassi-Olsson said Wednesday in an interview in neighboring Ivory Coast’s commercial capital, Abidjan. “Perhaps branch networks, part of a portfolio, a loan book, those kind of things.”
Fidelity Bank, which will be cautious about any asset purchase, will meet the capital deadline before the end of the year, she said. The lender had paid-up capital levels of 264.5 million cedis at the end of 2017, according to its website. Its assets jumped 53 percent in the first quarter through March to 6.3 billion cedis from a year earlier, while deposits rose 42 percent to 4.2 billion cedis.
While no major mergers and acquisitions have been announced, the new rules have spurred a flurry of capital-raising efforts, with Energy Commercial Bank Ltd. seeking to raise about 330 million cedis through an initial public offering, Societe Generale Ghana Ltd. planning a 170 million-cedi rights issue, and Universal Merchant Bank Ltd. in talks with investors for 260 million cedis.
The country’s fourth-biggest bank plans to list its shares on the Ghana bourse by 2020, Fidelity Managing Director Jim Baiden said last month. The “story is very attractive, the bank is financially sound in terms of performance and the brand awareness is very strong,” making it an ideal candidate for an IPO when the time comes, Kouassi-Olsson said.
Ghana’s banking industry is recovering from a crisis where a depreciating currency caused bulk distributors in the energy sector to default on their debt, leaving lenders exposed to almost $3 billion in bad loans in 2016. The central bank announced its requirement for the new capital levels in September, a month after the collapse of two lenders, while placing UniBank Ltd. under administration in March and appointing an adviser for Sovereign Bank earlier in May.
Bigger banks would rather buy assets than raise funds, which will allow them to make better use of their capital, Kouassi-Olsson said.
Make Money Work
“If you can’t put that money to work immediately, it’s not really profitable,” she said “The incentive will be to make an acquisition, because from day one you’ll be compliant to the minimum capital requirement, but also you’ll have access to some qualitative assets.”
Some banks have almost no saleable assets and are likely to cease trading, while other smaller participants may become non-banking financial institutions such as micro-lenders, said Kouassi-Olsson. That will leave the industry with two top tiers consisting of the strongest locally-based groups and the local units of international lenders such as Ecobank Transnational Inc. and Standard Bank Group Ltd., she said.
“We’ll see some alliances and buyouts,” said Kouassi-Olsson. “You don’t want to end up being the weakest institution within an industry where the number of banks will decrease.”
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