Ghana Banking Survey 2012

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com/gh
2012 Ghana Banking Survey

Enhancing customer value to sustain profitable growth
September 2012
Introduction
A message from our CSP
After successfully raising the required regulatory capital, the next critical action for banks is to optimise the allocation of capital across the business value chain, from service delivery to lending. In order to deliver value to their customers, banks must transform their operations, including people, products, networks and channels, processes and technology for greater efficiency. Going forward, banks must re-visit their customer operating models and re-define or identify the next drivers of growth in terms of products, sectors and geography and allocate adequate risk capital and people to serve the customer. This has become necessary as consumer behaviour is changing towards a more advanced lifestyle where technology driven products and services are becoming standard requirements. The more banks respond to growing consumer expectations the more they will be required to develop risk profiles around the new business direction which will be driven largely by technology.
Felix Addo Country Senior Partner
With 25 universal banks and over 120 other financial institutions, the customer has a choice and hence banks must demonstrate that they are meeting customer expectations in their bid to drive growth and expansion in deposits, loans, commissions and fees and improved profitability in the medium to long term. Transforming service offerings to customers is essential for sustainable growth and must be driven by both the Regulator and banks. The Regulator must provide the institutional framework and banks must see their customers as partners with mutual and complementary interests. In so doing, banks will achieve their optimal value for all stakeholders while balancing risks and maintaining profitability in the medium to long term.
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A message from the Executive Secretary of the Ghana Association of Bankers
The capital landscape has improved tremendously and consequently improved the resource capacity of the industry as a whole. To me, the key to sustaining this fine landscape in terms of continuous service delivery is Trust. Within a trust dominated banking environment, competition and economic growth works. You either have banking based on trust or banking based on risk; with trust, you can rely on banks to act with due regard to interest of those they serve. With risk dominated banking, the financial services structure depends instead on the structure of laws, regulations, Banking Supervision Departments interventions, Contracts, Commercial Courts, Punishments and penalties to drive banking and service to those they serve. This adds on to costs. Thus target-oriented banks will find ways of outwitting regulations. After several years of practice, I can conjecture that without trust, self-interest defeats regulations, undermines institutions and causes system failures. If we are to sustain our present gains and serve our clientele to the best of our abilities, we need, as participants in the financial services industry, to build Trust so that we can maximise the returns on the resources emanating from our present healthy capital levels.
D. K. Mensah Executive Secretary of the Ghana Association of Bankers
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Enhancing customer value to sustain profitable growth
Introduction
As part of this years survey, we interacted with senior executives of banks to get their perspectives on the direction of the industry over the next five years. Our interactions were around matters of change in the industry, the likely bases for competing in the future and key constraints to growth. Our discussions with these bank executives were on the following matters:

What in your view will be the main drivers of change in the banking industry over the next five years and why? Historically, banking in Ghana has been profitable; where do you think the next wave of high incomes and profits will be coming from? On what basis will banks compete over the next five years? What do you see as the greatest hindrance to growth over the next five years? After capitalisation, what is the immediate next step?
We point up that the graphs represent the perspectives of key industry executives. In the commentary, we have added our own thoughts following our discussions with these executives.
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Q1. What in your view will be the main drivers of change in the banking industry over the next five years and why?
Overall, banks feel that the Regulator and regulation are likely to be the biggest drivers of change in the near future. Over the past half decade, the Regulator has played a big role in shaping current trends in the industry. The increase in banks paid-up capital requirements, adoption of IFRS for reporting performance, and the introduction of risk-based banking supervision all have and continue to influence activity in the industry. Especially with the aftermath of the credit crunch in some developed economies governments and regulators are playing increased roles in market-driven economies and consumer-driven markets. It is clear that BoG is expected to continue to wield a significant amount of influence to determine the future direction and pace of change in the banking industry. Banks expect to position themselves such that they are able to effectively contribute to the process of developing regulations, such that new regulation is sensitive to banks operational needs as well as the needs of their investors. The next big thing that banks expect will influence change in the industry is considered to be competition. Bank executives acknowledge that with the additional capital that they have procured, there is even more pressure to produce above market average returns to investors. Thus, in the near term, banks expect there will be significant jostling within the industry to secure domestic market with such competition being more aggressive among the domestic banks, rather than from new market entrants. Private and institutional investors are making inroads or deepening their investments in Ghanaian banks. These include International Finance Corporation (IFC), Etablissements Delhaize Freres (DEG), Propaco, Financierings-Maatschappij voor Ontwikkelingslanden (FMO) and Kedari nominees.
Drivers/ Levers of Change
Regulation Competition
Private Equity Funds/ Strategic investor/ New Market Entrants Trends elsewhere in other geographies New/ different type of customer Population Growth
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While the macro-economy has been described as having posted high growth rates in the past few years and further shows a high growth potential, banking services penetration has been limited at less than 30% of population. The low penetration has been attributed to a range of factors, including the existence of a large subsistence economy that seems not to need banking services, cultural mindsets that lack the appetite for banking services, and the industrys general failure to produce innovative products that would be appealing to the peripheral consumer. Bank executives saw population growth as having only a minor role in shaping the future of the industry. Interestingly, the new type of customer (i.e. the young, technology savvy consumer) is not considered to be influential as yet in banking markets.
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Q2. Historically, banking in Ghana has been profitable; where do you think the next wave of high incomes and profits will be coming from?
Bank executives were requested to express their views using three different dimensions: business segments; economic sectors; and products. On business segments, banks expect that institutional banking clients will continue to dominate transactions in the banking industry, followed by SMEs. In both 2010 and 2011, more than 80% of deposit liabilities held by banks were of a non-retail nature. Bank executives noted that the sheer capacity and income streams, of institutional or corporate banking customers would most likely allow them to demand significant amounts of the resources put up by the banking industry. This is also in recognition that as the Oil and Gas (O&G) sector of the economy develops, related activities from that sector would fuel further growth in the demand for institutional banking services. The next business segment expected by the industry to contribute significantly to bank incomes and profits is the SME sub-sector. Historically squeezed for credit by the banking industry on grounds of unstructured governance and high credit default risks, SMEs are more and more being touted as key players in the countrys next wave of economic growth. Indeed, some banks have now established focused SME departments and have acquired capacity to address the peculiar needs of SMEs. This development has prompted more conservative banks to develop products for SMEs. Without a doubt, SMEs carry a risk profile that is different from larger and more structured corporate institutions. In our view, it is critical that banks acquire the requisite expertise to properly understand the business dynamics and related risk profiles of SMEs in order to avoid undue exposure of their risk capital, leading to reduced profits. Bank executives further noted that mid-tier income retail customers (i.e. mass affluent retail customers) will continue to remain an important factor in their business, contributing cheap deposits and helping to optimise net interest margins and profits.
2(A) Which business segment is likely to contribute the most to future incomes and profits?
Corporate/ Institutional Banking
SME Banking
Mid-tier Income Retail Banking High Networth Retail Banking
Retail Banking 0 2 4 6 8 10
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On the economic sectors expected to contribute the most to future incomes and profits, bank executives rated the oil and gas sub-sector as the most likely area of growth. In this regard, banks generally acknowledged the need to acquire requisite capability (capital and knowledge in the industry) to convert the opportunities into tangible business transactions. The local content legislation must play a role to compel the O&G industry to include domestic banks in funding key transactions or activities in the industry. We agree that vast opportunities exist along the entire value chain of the O&G sub-sector, and the earlier banks invest to build capacity, the better. Many bank executives assess that in the medium term, Ghanas economy will remain significantly import dependent and see commerce (trading) as the additional economic activity that will continue to contribute the most to the industrys incomes and profits, in light of its potential to generate multiple income streams.
On the assessment of what products would count towards the industrys incomes and profits in the medium term, banking executives identified unfunded income from Trade. A highly specialised form of banking and conducted within a very well organised international environment, structured trade (and commodity) finance provides the banking industry with a fairly safe source of non-interest income. However, the winners in this space would be the banks that maintain a wide network of credible correspondent banks in the countries where most of Ghanas imports originate, build deep technical knowledge of applicable trade products and the related documentation, and invest in technology that assures speedy and efficient transfers of documentation and funds. Next, banks noted that electronic banking would play a significant role in generating incomes and profits for the banking industry. At present, most of the banks within the industry offer some form of
electronic banking which allows customers view-only access to their account balances and transactions through notifications by SMS and email. A few players in the industry already have the technology that allows their customers to safely and securely execute transactions by themselves using a variety of electronic platforms or channels. At present some banks treat this as a product and derive revenue from transactions. However, electronic banking will increasingly become a minimum requirement for customer satisfaction, and banks will increasingly use it as a tool to mobilise critically required cheap deposits rather than to directly generate fee income. Consistent with what the industry generally assesses the role of the new type of consumer to be over the medium term, banks do not think that mobile banking (mobile money) is going to play a significant role in the generation of incomes and profits.
2(B) Which economic sector is most likely to contribute the most to future incomes and profits?
2(C) Which product is likely to contribute the most to future incomes and profits?
Oil & Gas
Trade
Commerce (trading)
Electronc Banking
Manufacturing
Agriculture
Mobile Banking
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Q3. On what basis will banks compete over the next five years?
The majority of bank executives interviewed rated people as the variable that would matter most to banks in the battle for the future. The industry defined people to include employees, (including management) customers, and shareholders. Banks emphasised that the increased competition in the domestic industry and access to global capital markets mean that more likely than before, bank customers would start requesting for more sophisticated products and services than the industry has been used to. This will require specialised skill sets to develop products and stringent policies by the Regulator to monitor the activities of banks. Another dimension of people that banks consider very important as a competitive variable is customers. Bank executives consider the quality of customers to play a critical role in banks businesses , as it has an impact on revenues, costs and therefore profits or losses. Referrals by top-rated customers also tend to generate healthy business for banks, without banks needing to spend significant levels of resources in due diligence to assure themselves that the associated risks are acceptable within their risk management frameworks. Additionally, banks remarked that the association tendency (known customers) would tend to make peer businesses within the same or related industries to want to do business with the same bank, especially when the bank is provided good references by one of their own (another bank). Within the allowable limits of exposure defined by regulations on sectoral concentration risks, banks are therefore likely to adopt some very aggressive strategies in marketing to these known customers. Yet another category of people defined by the banking industry is shareholders. Banks explained that in light of the clout that institutional investors especially wield in the governance of banks, it is important to have the right shareholder committed to sustaining long term profitable growth. Bank executives therefore noted that, in light of the pending deadline for meeting the regulatory requirement related to minimum paid up capital, some banks might have entered into uneasy marriages. How such relationships play out would only be a matter of time. Industry players acknowledge the critical importance that cheap deposits play in the survival and profitability of banks. Banks noted that they would consider both brick and mortar, and electronic channels in extending their reach for competitive reasons. Banks have been slow in deploying IT platforms for product development because of the perception that the Ghanaian market is not ready for electronic channels. In spite of this reluctance, we are of the view that there are clear signs that change is coming to how banks conduct business through their distribution channels. In many places, advances in telecoms have had some impact on product development and distribution. M-Pesa money transfer service (the Kenyan success story) is a good example of a highly successful partnership between the financial services sector and the telecoms industry. M-Pesa has demonstrated that with the right business model, banks could get peripheral customers of the banking industry interested in banking services. With most phones currently having data exchange functionality, banks could leverage on the present penetration of the mobile network to rope in the hitherto unbanked proportions of the population.
The basis upon which banks are likely to compete in the future.
People-Customers, Employees, Shareholders Reach- Branch, Techonology Products and Services Brand-International, Strong/ National Character or Approach Correspondent Banking Network 0 2 4 6 8 10
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Q4. What do you see to be the greatest hindrance to growth in the medium term?
The macroeconomic environment is considered as a key factor that will affect growth within the banking sector in the medium term by the banking industry executives. The current GDP growth and stable inflation are favourable. However depreciation of the cedi and rising interest rates are threats to the business communities ability to sustain profit and growth. Bankers were of the view that if the quality of customer credit profiles deteriorates lending will continue to be a challenge and that will adversely impact profits. Quality of risk management, management capabilities, and governance were considered as factors that could hinder the growth of banks in the medium term. Bankers were of the view that inadequate and effective governance structures could manifest into exposure concerns and financial losses, thus affecting or slowing down growth ultimately. Strong management capabilities to implement strategic decisions is necessary to instil market and customer confidence in banks and sustain growth. To remain competitive banks must review their current risk management framework in line with a growing and sophisticated customer base, develop and acquire the relevant skills set for strategic decision making. Hinderances to growth
Currencies Macro-Economic risk Interest Rates Credit Risk Others (?) Quality of Risk Management Regulation Management Capabilities Corporate Governance Liquidity Capital Availability 0 2 4 6 8 10
Strong management capabilities to implement strategic decisions is necessary to instil market and customer confidence in banks and sustain growth. To remain competitive banks must review their current risk management framework in line with a growing and sophisticated customer base, develop and acquire the relevant skills set for strategic decision making.
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Q5. After capitalization what is the next immediate step?

The question is after capitalisation what is the next step, what are the critical resources, elements, or objectives of Banks? Bank executives ranked the priorities in the allocation of capital as shown in the chart. Local and global competition is intense and articulating a medium term strategy is paramount for aggressive growth. In allocating capital resources to enhance the capability to mobilise deposits and service customers, the banks strategy will focus on the Corporate Banking (including SME) business units. Liability driven expansion was considered the second most important priority. In trapping deposits banks must aim to have an efficient mix of demand and savings deposits to fixed deposits over the medium term. The right skills set and continuous development programmes are essential to build capacity for planned growth. The first step is to articulate a people and change strategy to bring in line the current people skills and knowledge with strategic direction of the banks. Transformation of the entire business process was ranked fourth in order of priorities. Banks must allocate capital to transform their service delivery platforms, infuse a new service culture, and transform sales behaviours to ensure that capital is adequately utilised in an effort to improve return of equity and assets. Technology makeover is not considered to be of priority. This is not surprising because global banks can leverage on the state of the art technology provided by the group. While local banks are focusing on optimising business performance, keeping pace with technology does not feature as a priority.
Next steps
Strategy Development
Liability driven Expansion
Capacity Development
Transformation
Technology Makeovers
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2012 Ghana Banking Survey 2012 Ghana Banking Survey
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Overview: the economy
Economic Growth
The Ghanaian economy has experienced an annual GDP growth of 14.4% in 2011 compared to 8.0 % in 2010. By separating the effects of the oil sector, the real GDP growth rate of 8.7% marginally outperformed the 2010 GDP growth rate by 0.7%. Driven by a combination of strong growth in the mining and oil sectors real GDP growth is expected to increase to a rate of between 7.5% to 8.0% in 2012. GDP growth rate
16% 14% 12% 10% 8% 8.5% 6% 4% 2% 0% 2008
14.4%
8.0% 4.0% 2009 2010 2011
Source: Ghana Statistical Service
The Agricultural sector continues to experience low growth, resulting from a significant fall in the growth of forestry and logging activities and fishing and crop production sub-sectors. This decline is attributed to ecological conservation and relatively low re-afforestation programme. The steep growth in the Industry Sector was mainly on account of crude oil production thus becoming the second largest sector after Services; a position occupied by Agriculture in the past few years. The Industry Sector (including Oil) recorded a growth outturn of 15.5% in 2011 compared with a non-oil growth of 5.6% in 2010. The growth in Industry Sector was underpinned by a more than doubling of the size of the Mining and Quarrying subsector mainly on account of crude oil production. Construction and manufacturing sub-sectors also performed remarkably, growing by 20.0% and 13.0% in 2011 and 2010, respectively. The performance of the construction sub- sector can be attributed to the investments in road infrastructure. The growth rate for the Services Sector dropped by 1.5%, the sector still maintains itself as the largest sector in Ghanas economy. The main drivers of growth in the sector include trade, and household sub-sector, which grew by 17.9%. The information and communication sub sector grew by 17.0%.
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Headline inflation and interest rate

Inflation Inflation fell from 9.1% in January 2011 to 8.6% in December 2011. During the first quarter of the year, inflation rose after the upward adjustment in petroleum prices, from 8.6% in December 2010 to 9.2% in February 2011, but subsequently declined in the remaining quarters. The single digit inflation was sustained by low food inflation, which fell from 4.8% at the beginning of the year to a historical low of 2.8% in June and subsequently rose to 4.3% by December. Non-food inflation, which was 11.8% at the beginning of the year, increased to 12.4% by June 2011 but eased to 11.2% by the end of the year.
35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2008
2009
2010
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
2011
Headline inflation
Source: Bank of Ghana Statistical Bulletin
Prime Rate
Base Rate
Interest rates The policy rate which stood at 18% in December 2009 fell to 13.5% in July 2010 and further reduced by 50 basis points each in May and July 2011 to bring the rate to 12.5% where it remained up to the end of December 2011. The rate was revised upwards to 15% in June 2012 and remained unchanged at September 2012. The average base rate in the industry fell from 24.3% to 21.5% in 2011. Lending rates in the industry followed a similar trend and dropped from an average of 27.6% in January to 25.9% in December 2011. In 2011, the money markets witnessed a downward trend: the 91day and 182-day treasury bills declined from 12.16% and 12.68%, respectively to 10.30% and 11.1%.
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Foreign exchange rate

Exchange rate Based on these unfavourable trends, the Ghana Cedi traded weaker during 2011 compared to the same period in 2010. In the InterBank Market, the Ghana Cedi depreciated by 5.0%, 10.5% and 7.6% against the US dollar, British pound sterling and Euro respectively compared to depreciation of 3.1% against the dollar and appreciation of 2.0% and 5.7% against the pound and Euro respectively in 2010. The Central Bank has since introduced measures to check the persistent weakening of the Ghana Cedi.
3.00 2.50 2.00 1.50 1.00 0.50 0.00
US Dolar
Pound Sterling
EURO
Source: Bank of Ghana Statistical Bulletin and Annual progress report for the year 2011 : Ministry of Finance and Economic Planning.
Ghana Stock Exchange

Ghana Stock Exchange (GSE) On 4 January 2011, the Ghana Stock Exchange introduced the GSE Financial Stocks Index (GSE-FSI) for measuring the performance of the listed financial institutions. The base index value was set at 1000 points. On 31 December 2011, the GSE-FSI had dropped by 3.10% to 969 points. Despite improved profitability of the listed financial institutions, the movement in share price does not reflect this trend. Market capitalization went up by 136.59% from the December 2010 value of GH20.12billion to GH47.35billion in 2011. The increase was due mainly to the listing of Tullow Oil Plc. During the year, Accra Breweries Limited and CFAO voluntarily delisted from the Ghana Stock Exchange, bringing the total number of equities listed to 34.
Source: Ghana stock exchange website.
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Overview: the industry
Industry developments in 2011- Banking regulatory and supervisory framework

Anti - money laundering The Anti-Money Laundering and the Combating of the Financing of Terrorism (AML/CFT) Guidance for Banks and Non-Bank Financial Institutions was jointly prepared and published by the Bank of Ghana and the Financial Intelligence Centre. The guidelines include; customer due diligence, monitoring and responding to suspicious transactions, reporting requirements and record keeping. The regulations should be enforced to support the banks safeguard against exposure to money laundering. Sanctions from the international community for infringements will have an adverse effect on relationships with correspondent banks and growth of banks in Ghana. Credit referencing In addition to XDS Data Ghana Ltd, another credit reference bureau, Hudson Price Data Solutions, was issued with an operating licence, while Dun & Bradstreet was also granted provisional approval during the year. As at end-December 2011, all Deposit Money Banks (DMBs) had signed up for credit reference services and were sharing data, while twenty-seven NBFIs submitted data to the bureaux. Financial institutions are gradually embracing the idea of credit referencing with most of the institutions incorporating credit checks into their credit management processes. The total number of hits (credit checks) made by financial institutions increased from 13,490 in 2010 to 79,200 in 2011. (Source data: Bank of Ghana website) Developments in the settlement and payment systems Infrastructure projects were implemented to improve the settlements and payments system. These included extension of the Cheque Codeline Clearing with cheque truncation system nationwide and upgrade of the Ghana Interbank Settlement System. The first phase of the project to enhance interoperability of the card-based systems in the country was completed. To further enhance interoperability among banks and expand electronic retail banking in the economy Ghana Inter bank Payment and Settlement System (GHIPSS ) implemented the Open Switch and direct debit components of the Automated Clearing House (ACH) system. Further improvements were made to the e-zwich system. Improvement in the speed and reliability of these settlement and payments system will build trust and transparency of the banks and move the industry closer to a cashless economy. Issue of securities for government borrowing At the end of the year, a total of GH11, 070.9 million was raised from the issue of securities to finance Public Sector Borrowing Requirements. Maturities amounted to GH8,123.9 million, resulting in net borrowing of GH20,947 million. Business combination In the past year, mergers and acquisitions in the banking industry have been encouraged with the expectation that the merged institutions will be able to undertake larger transactions. By the close of the year 2011 , the negotiations were in a far advanced stage between Ecobank and The Trust Bank Limited (TTB). Another business combination between Access Bank Ghana and Intercontinental Bank Ghana was prompted by an acquisition of the latters parent company in Nigeria by Access Bank Plc. These transactions have since been concluded. Collateral Registry In, 2011, the Bank of Ghana with the support of the International Finance Corporation (IFC) and Swiss State Secretariat for Economic Affairs (SECO) embarked on the redesign of the Collateral Registry established under the Borrowers and Lenders Act 2008, Act 773 to make the Registrys systems, processes and procedures modern and competitive with Secured Transactions Registries across the world. The objective of the assignment is for the development of a software and the procurement of relevant infrastructure that enables the Registrys services to be discharged and accessed electronically in real time. Measures on Foreign Deposits To curb the effects of the depreciating Cedi, initially, the Monetary Policy Committee (MPC) of the Bank of Ghana (BOG) increased the policy rate and reduced the limits on Net Open Position (NOP) of banks. The measures were intended to improve the attractiveness of cedi assets and increase the supply of foreign exchange to the market. To reinforce the monetary policy stance and restore stability and transparency in the foreign exchange market, the Bank has recently also decided on the following measures:
The re-introduction of Bank of Ghana Bills in the following tenors 30 days, 60 days and 270 days. This is intended to support the monetary operations of Bank of Ghana and provide additional avenues for Cedi investments. Revision in the application of the statutory reserve requirement of banks to include foreign deposit liabilities in Ghana Cedis only. All banks will now be required to maintain the mandatory 9% reserve requirement in Ghana cedis only. Consequently, banks will no longer hold the reserves in different currencies. Provision of Cedi cover for vostro balances. All banks are required to provide 100 percent Cedi cover for their vostro balances, to be maintained at Bank of Ghana. This is in line with the provision in the Operational Guidelines Pursuant to the Foreign Exchange Act, 2006 (Act 723) that precludes foreign investor participation in the short end of the money market.
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Quartile analysis
Industry Operating assets grew by GH16.4b in 2010 to GH19.9b in 2011 For a reasonable comparison and analysis of the industry, we group participating banks into quartiles, based on the value of their operating assets. We consider banks operating assets to be a key business performance indicator as well as the basis for which stakeholder value is derived, hence our choice of this metric. All participating banks have been ranked based on the carrying amounts of their operating assets held as at 31 December 2011.
Operating assets (in billions of Cedis)
9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 2011 2010 2009 2008 Cash Assets Liquid Assets Net Loans and Advances Other Operating Assets
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Liquid assets is gaining prominence from being 16% (2008) to 29% (2011) of total industry operating assets
Total operating assets grew from GH16.4 billion in 2010 to GH19.9 billion in 2011. However, the mix of operating assets in the industry for the year compared to 2010 did not change. Loans and advances continue to be the most significant component of the industrys earning asset as it contributes approximately 63% of total income of banks despite the decline in the average lending rates from 27.3% in December 2010 to 25.9% in December 2011. The contribution of net loans and advances to total operating assets declined marginally from 43% in 2010 to 41% in 2011. In 2008, when most global economies were experiencing financial crisis, net loans and advances contributed 57% of the operating asset portfolio in Ghanas banking industry. The composition has steadily declined because banks continue to exercise constrains in lending as they purse various actions to recover from non performing debts. The risk free government securities appear as an attractive investment option. Its composition of operating assets grew from 16% in 2008 to 29% in 2010. The composition of liquid assets to total operating assets of the industry however remained relatively unchanged in 2011. Composition of industry operating assets
60% 57%
50% 43%
47% 41%
40%
30%
28%
27%
28%
29% 29% 26% 23%
20% 16%
10% 1% 1% 2% 2% 0% Cash Assets Other Liquid Assets 2011 2010 Net Loans and Advances Other Operating Assets 2009 2008
(Source: Bank of Ghana Statistical Bulletin )
Growth in operating assets is funded by the improvement in deposit mobilisation and capital injection
Cash assets contributed 28% (2010: 27%) of the total industry operating assets. The increase was mainly a result of growth in customer deposits by approximately 28% which had a positive impact on the banks reserves with the Central Bank. Some banks including ADB, Stanbic and Baroda also recapitalised during the period . The capital injection improved the cash asset position. We have presented in the next few pages changes in quartile arrangements and industry operating assets rankings.
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The rapid growth experienced between 2008 and 2010 in operating asset is slowing down
First Quartile Group (Q1) Total operating assets for the six banks in the quartile increased by 88% from GH5.5billion (2008) to GH10.3billion (2011). GCB continued to be dominant in the operating assets of this quartile. The Banks operating assets increased from GH 1.6 billion in 2008 to GH2.6 billion in 2011. EBG now holds the second largest operating assets in the quartile with total operating assets of GH1.4 billion in 2010 to GH2 billion in 2011.
Second Quartile Group (Q2)
The group is the fastest growing as operating assets more than doubled from GH1.9billion (2008) to GH4.6billion (2011). Fidelity has the largest operating assets within the group. The Banks operating assets increased from GH631 million in 2010 to GH1.1 billion in 2011. CAL and NIB moved up three places in 2011 to occupy the tenth and eighth places respectively.
Third Quartile Group (Q3)
Total operating assets in Q3 increased threefold from GH1 billion (2008) to GH3.1billion (2011). BOA moved out of this group to the fourth quartile, however the banks operating assets reduced from GH386 million in 2010 to GH367 million in 2011. UGL moved to join the group with a total operating assets of GH505 million (2010: GH341 million).

Fourth Quartile Group (Q4)
The operating assets of this group increased by 65% from GH1.1billion (2008) to GH1.8billion (2010). HFC holds the largest operating assets in the quartile. The Banks operating assets increased from GH338 million in 2010 to GH407 million in 2011. Energy Bank commenced operations during the year and joined this quartile. At the end of 2011 its operating assets of GH193 million was ahead of existing players; FAMBL, BARODA and BSIC.

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First Quartile Banks - Profit before tax margin

60% 50% 40% 30% 20% 10% 0% -10% -20%
2011 2010 2009 2008
SCB, ADB and Stanbic posted increased PBT margins but GCB suffered a decline.
.
GCB
EBG
SCB
BBGL
Stanbic
ADB
First Quartile Banks - Return on equity

50% 40% 30% 20% 10% 0% -10% -20%
2011 2010 2009 2008
Return on equity for BBG, SCB and EBG continued to dominate the group.
GCB
EBG
SCB
BBGL
Stanbic
ADB
First Quartile Banks - Impairment allowance/gross loans and advances
25% 20% 15% 10% 5% 0% GCB EBG

2011
The quality of loan portfolio of all banks in this group appreciated over the year with the exception of GCB.
SCB
2010 2009
BBGL
2008
Stanbic
ADB
First Quartile Banks - Share of industry advances

25% 20% 15% 10% 5% 0% GCB EBG
2011
EBG now has the largest exposure to customers in the market.
SCB
2010 2009
BBGL
2008
Stanbic
ADB
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First Quartile Banks - Share of industry deposits

16% 14% 12% 10% 8% 6% 4% 2% 0% GCB EBG
2011
GCB remains the largest holder of deposits but EBG is aggressively gaining market share.
SCB
2010 2009
BBGL
2008
Stanbic
ADB
First Quartile Banks - Cost income ratio

90% 80% 70% 60% 50% 40% 30% 20% 10% 0% GCB EBG
2011
ADB and GCBs restructuring and business transformation cost had an adverse impact on the CIR.
SCB
2010 2009
BBGL
2008
Stanbic
ADB
Second Quartile Banks - Profit before tax margin

60% 40% 20% 0% -20% -40% -60% -80%
2011 2010 2009 2008
Fidelity
NIB
SG-SSB
CAL
ZBL
IBG
All the banks in this quartile showed an improvement in PBT except for ZBL and IBG.
Second Quartile Banks - Return on equity

60% 40% 20% 0% -20% -40% -60% -80% -100% 2011 2010 2009 2008 Fidelity NIB SG-SSB CAL ZBL IBG
Return on equity for NIB significantly improved compared to 2008.
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Second Quartile Banks - Impairment allowance / gross Loans and advances

40% 35% 30% 25% 20% 15% 10% 5% 0% Fidelity NIB SG-SSB
2011 2010 2009
NIB impairment loss worsened despite creating a SPV to pursue the non performing loans.
CAL
2008
ZBL
IBG
Second Quartile Banks - Share of industry advances

6% 5% 4% 3% 2% 1% 0% Fidelity NIB SG-SSB
2011 2010 2009
Fidelity and CAL made significant inroads in gaining market 1% share.
331,586 512,684
CAL
2008
ZBL
IBG
35%
Second Quartile Banks - Share of industry deposits

6% 5% 4% 3% 2% 1% 0% Fidelity NIB SG-SSB
2011 2010 2009
Q2 banks are steadily gaining market share in deposits.
CAL
2008
ZBL
IBG
Second Quartile Banks - Cost income ratio

90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Fidelity NIB SG-SSB
2011 2010 2009
Greater cost discipline led to an improved CIR for all Q2 banks except for SC-SSB .
CAL
2008
ZBL
IBG
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Third Quartile Banks - Profit beforfe tax margin

60% 40% 20% 0% -20% -40% -60% -80%
2011 2010 2009 2008
Interest margins dwindled during the year but the third quartile banks sustained PBT above 20%.
UTB UBA TTB PBL UGL GTB
Third Quartile Banks - Return on equity

60% 40% 20% 0% -20% -40% -60% -80% -100%
2011 2010 2009 2008
UBA has made strong recovery since losses in 2008 to post the best ROE in Q3.
UTB UBA TTB PBL UGL GTB
Third Quartile Banks - Impairment allowance/gross loans and advances

25% 20% 15% 10% 5% 0% UTB UBA
2011
For the first time since incorporation UTB gross loan loss fell below 5% but GTBs worsened above 5%.
TTB
2010 2009
PBL
2008
UGL
GTB
Third Quartile Banks - Share of industry advances

7% 6% 5% 4% 3% 2% 1% 0% UTB UBA
2011
Third quartile banks holds 21.2% (2010: 19.8%) of the market share in loans and advances to customers.
TTB
2010 2009
PBL
2008
UGL
GTB
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Third Quartile Banks - Share of industry deposits

4% 3% 3% 2% 2% 1% 1% 0% UTB UBA
2011
All the banks in the third quartile chalked some success in deposit mobilisation except GTB
TTB
2010 2009
PBL
2008
UGL
GTB
Third Quartile Banks - Cost Income Ratio

180% 160% 140% 120% 100% 80% 60% 40% 20% 0% UTB UBA
2011
Cost reduction strategies adopted yielded results and suppressed the CIR
TTB
2010 2009
PBL
2008
UGL
GTB
Fourth Quartile Banks - Profit before Tax margin

100% 50% 0% -50% -100% -150% -200% -250%
2011 2010 2009 2008
HFC
BOA
ABG
ICB
EBL
FAMBL
Baroda
BSIC
MBG
BSIC recorded a positive PBT margin for the first time since 2008 and Baroda recorded the highest profit before tax margin in the group.
Fourth Quartile Banks - Return on equity

45% 40% 35% 30% 25% 20% 15% 10% 5% 0% HFC BOA ABG ICB
2011 2010
HFC and ABG showed strong return on equity.
EBL
2009
FAMBL
2008
Baroda
BSIC
MBG
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Fourth Quartile Banks - Impairment allowance / gross Loans and advances

25% 20% 15% 10% 5% 0% HFC BOA ABG ICB
2011 2010
BOAs impairment allowance to gross loans and advances increased considerably over the f0ur-year period while ABG and ICB showed significant improvement.
EBL
2009
FAMBL
2008
Baroda
BSIC
MBG
Fourth Quartile Banks - Share of industry advances

6% 5% 4% 3% 2% 1% 0% HFC BOA ABG ICB
2011 2010
The market share has not improved compared to prior year.
EBL
2009
FAMBL
2008
Baroda
BSIC
MBG
Fourth Quartile Banks - Share of industry deposits

6% 5% 4% 3% 2% 1% 0% HFC BOA ABG ICB
2011 2010
HFC total deposits continue to increase compared to prior years, whilst BOA and FAMBL decreased.
EBL
2009
FAMBL
2008
Baroda
BSIC
MBG
Fourth Quartile Banks - Cost Income Ratio

350% 300% 250% 200% 150% 100% 50% 0% HFC BOA ABG ICB
2011 2010
Significant growth in income had a favourable impact on the CIR for BSIC.
EBL
2009
FAMBL
2008
Baroda
BSIC
MBG
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Market share analysis
GCB consolidated its leadership in deposit mobilisation, with the largest market share for the third consecutive year since 2009.
Share of industry total deposits Deposits in the banking sector grew by 28% from GH12.6 billion in 2010 to GH16.1 billion in 2011. The rates for time deposit dropped over the period. Between 2008 and 2009 the deposit rates ranged between 14% to 20%. However in 2011 the deposit rates had declined to ranges between 6% to 9%. The decline did not deter customers from making placements with banks. Customers continue to rely on banks to hold idle funds because of the limited investment options in money market. Over the last three years that the industry has experienced growth the second quartile banks are showing faster growth than the first quartile. The industrys first quartile bank had an average growth rate (CAGR) of 27% over the last 3 years; the 2nd quartile banks made of 6 banks grew at a rate (CAGR) of 39% over the last 3 years. Technology-driven banking boosted deposit growth for some of the 2nd quartile banks which may not be as widely networked geographically. Overall, the industrys deposit mix by product type did not change significantly from prior year. About 69% of deposits was held in current and savings accounts. This concentration has remained the same as banks continue to seek inexpensive source of funds. Further, few products are structured by banks which target investments for longer terms. With funds becoming available from the second and third tier pension contributions there will be a growing need to develop products for these funds. The top five banks per market share of deposits accounted for 47.7% (2010: 46.7%) of total industry deposits However, the existence of an extensive branch network as strategy for deposit mobilisation may be disappearing. EBG in 2011, mobilised GH1.7billion of deposits using a branch network of 78, while GCB with its 157 branches (more than double that of EBG) closed the year with a deposit balance of GH2.1billion. Increased competition in the banking industry, cost some of the other banks to lose market share . The hardest hit, included ZBL and BOA. These banks lost 18% and 40% of their market shares respectively. ZBLs slide down is a result of a 3% fall in its fixed deposits. For the first time since 2000, ZBL did not make progress in mobilising deposits. A general uncertainty arising from changes in ownership may have impaired BOAs ability to mobilise deposits. CAL and UTB were among the largest gainers for 2011, increasing their market shares by 44% and 57% ,respectively. UTBs intensive marketing and deposit mobilisation efforts over the past two years following its consolidation with UT Financial Services Limited in 2010 yielded positive results as the bank grew its deposits by 85% in 2011, offering attractive rates to its savings depositors and increasing its saving deposits threefold over the last year. CAL appears to have instilled some customer confidence following the uncertainties arising from the boardroom wrangling. Together with improved service delivery and introduction of new banking products and platforms including the Enhanced Transfer Request System (ETRS) A bulk payment system for corporate clients and branch expansion by CAL, led to a phenomenal increase in customer deposits which more than doubled. The latest entrant; EBL which began operations in 2011 made some inroad and ended the year ahead of Baroda and BSIC who have remained in the bottom two over the past three years. Baroda lost over 50% of its market share in 2011 and continued to mobilise deposits from its one branch located in Accra.
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The latest entrant; EBL which began operations in 2011 placed 24th on the league table, ahead of Baroda and BSIC
Share of industry deposits
GCB EBG BBGL SCB Stanbic Fidelity ADB NIB SG-SSB IBG CAL ZBL UGL UBA PBL TTB UTB BOA HFC GTB ABG ICB FAMBL EBL BSIC Baroda MBG 2011 12.8% 10.7% 9.3% 9.2% 5.7% 5.6% 5.1% 4.5% 3.9% 3.8% 3.6% 3.6% 3.0% 2.9% 2.8% 2.3% 2.1% 1.8% 1.7% 1.6% 1.0% 0.9% 0.8% 0.7% 0.4% 0.1% R 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 2010 12.5% 9.5% 10.2% 8.7% 5.8% 4.4% 4.3% 4.0% 3.9% 3.3% 2.3% 4.4% 2.6% 2.5% 2.7% 2.3% 1.5% 3.0% 1.5% 2.3% 0.7% 0.9% 1.2% 0.4% 0.3% 5.2% 100.0% R 1 3 2 4 5 8 9 10 11 12 17 7 15 16 14 19 21 13 20 18 24 23 22 25 26 6 2009 12.8% 10.2% 11.7% 8.6% 6.0% 3.0% 4.3% 3.4% 4.0% 3.4% 2.8% 4.8% 1.9% 2.0% 2.6% 2.3% 0.8% 3.1% 1.4% 1.8% 0.2% 0.9% 2.6% 0.1% 0.1% 5.2% 100.0% R 1 3 2 4 5 13 8 10 9 11 14 7 19 18 16 17 23 12 21 20 24 22 15 25 26 6 2008 14.3% 8.5% 15.2% 9.6% 4.7% 2.0% 4.1% 3.2% 3.8% 3.4% 2.2% 4.3% 1.2% 2.4% 2.5% 2.3% 0.3% 3.3% 1.4% 2.0% 0.9% 4.2% 0.1% 0.0% 4.1% 100.0% R 2 4 1 3 5 18 8 13 10 11 17 6 21 15 14 16 23 12 20 19 22 7 24 25 9
Industry 100.0%
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GCB, was pushed from its number one position by EBG, which increased its market share by 45%...
Share of industry total loans and advances. Total industry loans and advances increased from GH6.7billion in 2010 to GH9.1billion in 2011 with a growth of 18% compared to a growth of 15% from 2009 to 2010. The growth in the economy, driven by the oil and gas sector and related activities increased demand for credit, which was met by the larger and more capitalised banks in the industry. The industrys loan to deposit ratio dropped from 69% in 2009 to 57% in 2011, because of the improved liquidity banks maintained and relatively low appetite for lending. Lending was directed towards the mining, services, housing and utilities. This is an outcome of favourable economic factors as well as Governments focus in enabling the private sector to develop infrastructure. Credit to the agricultural sector still lags behind. Despite the tax concessions, the industry is yet to overcome the peculiar challenges in lending to smallholder growers with limited credit history, unpredictable weather condition and market availability. GCB lost 60% of its market share because the bank reduced its exposure to the public sector by over 70% in 2011. EBG is now the dominant lender in the market. The growth arose from term facilities extended to customers. It appears EBG is writing facilities for longer terms because 62% of its loan book is due over one year, compared to 2010 only 5% of the loan book was due over one year. ADB, SCB and BBGL also managed to maintain their positions in the top five. Stanbic joined the group as one of the key players in the industry.
The introduction of the Credit Referencing Bureaus facilitated the lending procedures for most banks
ABG grew its market share of advances almost threefold, as it closed its second full year of operations. The banks loan portfolio in 2011 was skewed towards the utilities sector, which accounted for over 60% of total loans. CAL and Fidelity gained market share. Both banks have moved into the top 10 lenders, which is to be expected as a result of the banks improvement in deposit mobilisation. The banks portfolio concentration is in the construction, services and commerce sectors. Notwithstanding Barodas 50% increase in market share, the bank remained in the bottom two due to the relatively small size of its operations, as well as its low level of deposits. As part of a group which is one of the largest banks in India and with expertise in SME lending, there is a potential for this bank to leverage on that experience and make a stronger presence in providing credits in the industry. The introduction of the Credit Referencing Bureaus facilitated the lending procedures for most banks. This is likely to ease the process of lending to SMEs , which hitherto had been the customer group with the highest default rate for majority of the banks, despite its growth potential. Lending is expected to increase, as the recent government programmes on infrastructural development driven by the public private partnership is strengthened.
Share of industry loans and advances

EBG ADB SCB BBGL Stanbic GCB UTB CAL Fidelity NIB UGL SG - SSB TTB IBG PBL HFC ZBL BOA UBA GTB FAMBL ICB ABG BSIC Baroda EBL MBG Industry 100.0% 2011 10.3% 8.2% 7.2% 7.1% 6.1% 5.8% 5.8% 5.0% 5.0% 4.8% 4.3% 4.2% 4.1% 3.9% 3.5% 2.6% 2.4% 2.4% 2.1% 1.4% 1.2% 1.0% 0.9% 0.5% 0.2% 0.1% R 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NA 100.0% 2010 6.2% 7.1% 6.7% 8.2% 3.3% 14.3% 4.3% 4.9% 3.7% 3.9% 3.9% 3.2% 3.0% 3.8% 2.7% 2.6% 3.1% 2.0% 1.4% 4.5% 1.2% 0.7% 0.3% 0.3% 0.1% 4.7% R 5 3 4 2 14 1 9 6 13 10 11 15 17 12 18 19 16 20 21 8 22 23 25 24 26 7 NA 100.0% 2009 8.4% 7.3% 6.7% 6.1% 5.5% 20.7% 4.9% 4.3% 3.5% 3.4% 3.1% 3.0% 2.9% 2.8% 2.7% 2.6% 1.8% 1.8% 1.5% 0.8% 0.6% 0.6% 0.2% 0.1% 0.1% 4.7% R 2 3 4 5 6 1 7 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 8 NA 100.0% 2008 12.7% 7.0% 8.1% 6.6% 5.5% 19.2% 5.1% 4.3% 3.4% 3.1% 2.4% 2.8% 1.5% 2.9% 2.1% 2.5% 1.2% 0.7% 3.0% 0.5% 0.7% 0.5% 0.0% 0.0% 4.2% R 2 4 3 5 6 1 7 8 10 11 16 14 18 13 17 15 19 20 12 23 21 22 NA 24 25 9 NA
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EBG surged past BBGL and SCB to become the second largest bank per operating assets.
Share of industry total assets The growth in total assets is at a slower pace. In 2010 operating assets grew by 25% compared to 2011, the industry achieved a 21% growth. Despite the growth in deposits funding for assets dwindled because of the industry suffered a 26% drop in borrowings and earnings retained in shareholders funds. The industrys assets are largely held in loans and advances, which formed 39% of total assets in 2011. Cash assets increased by 30% from 2010, emphasising its direct relationship with deposits which increased by 28%. Non-operating assets increased by a marginal rate of 2% , as most banks have reduced their branch expansion efforts to focus on strategies to provide quality services to the customers. The top five banks comprise of 46% of the total industry assets, with GCB maintaining its lead. However, GCB has been losing market share since 2009 possibly as it realigns to customer needs and implements strategies for sustaining long term profitable growth. EBG was the only bank in the top five to gain market share and go ahead of SCB. While SCB mobilised additional GH387 million in deposit and partly settled borrowings of GH161 million mainly from the Standard Chartered Bank Group, EBG was more successful in mobilising deposits to the tune of GH491 million and secured a net inflow of funds from borrowings of GH 22 million. The main source of borrowings for EBG also came from the Ecobank Group. Fidelity and CAL gained market share in 2011. The funding for the increase in total assets is attributed to the strong growth in deposit mobilised by these banks. In addition CAL and Fidelity raised capital through rights issue and preference shares of GH 13.9million and GH 12million ,respectively. Although FAMBL secured GH 35 million from debt funding the growth in 2011 was only 58% as compared with the 80% achieved in 2010. FAMBL and BOA experienced the largest attrition to their market shares in 2011. This is not unusual as these banks undergo ownership changes and develop strategies to improve operations. In addition ,the ability to mobilise deposit locally and borrow from other external source will become a source for funding for further growth in the industry. The price at which these funds are obtained and source will be of importance.
Share of industry total assets

GCB EBG SCB BBGL ADB Stanbic Fidelity NIB SG-SSB CAL Intercont UTB ZBL TTB UBA UGL PBL GTB HFC BOA ABG ICB EBL FAMBL BSIC Baroda MBG Industry 2011 11.6% 10.1% 9.3% 9.0% 5.7% 5.4% 4.9% 4.2% 4.0% 3.7% 3.4% 3.4% 3.3% 2.7% 2.7% 2.7% 2.6% 2.1% 2.% 1.8% 1.3% 1.2% 0.9% 0.9% 0.5% 0.4% N/A 100.0% R 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 N/A 2010 12.0% 8.7% 9.5% 9.4% 5.8% 5.1% 3.7% 4.1% 3.9% 2.9% 3.1% 3.0% 3.7% 2.7% 2.3% 2.3% 2.3% 2.4% 2.1% 2.4% 1.1% 1.2% 1.1% 0.4% 0.4% 4.6% 100.0% R 1 4 2 3 5 6 11 8 9 14 12 13 10 15 19 20 18 16 21 17 23 22 24 25 26 7 2009 13.7% 9.8% 10.1% 10.4% 5.3% 5.1% 2.6% 3.9% 4.1% 3.2% 3.1% 0.7% 4.0% 2.2% 1.9% 1.6% 2.4% 2.0% 1.9% 2.5% 0.7% 1.4% 2.1% 0.2% 0.1% 5.0% 100.0% R 1 4 3 2 5 6 13 10 8 11 12 23 9 16 19 21 15 18 20 14 24 22 17 25 26 7 2008 15.3% 8.2% 9.2% 12.9% 5.8% 4.3% 2.0% 3.8% 4.1% 3.1% 2.8% 0.4% 3.6% 2.4% 1.8% 1.1% 2.6% 1.6% 3.5% 2.8% 1.0% 3.4% 0.1% 0.1% 4.1% 100.0% R 1 4 3 2 5 6 18 9 8 13 15 23 10 17 19 21 16 20 11 14 22 12 24 25 7
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Profitability and efficiency
Baroda posted an impressive PBT, compared to FAMBL.

Profit before tax margin The industrys profit before tax margin rose from 27.2% in 2010 to 30.6% in 2011.This is attributable to an 18% decline in interest expense and a 30% increase in net fees and commission income, compared to 2% decline and an 18% increase in 2010, respectively. Gross loans and advances increased by 18% from GH 7.71 billion in 2010 to GH 9.12 billion however, interest income decreased by 16%, compared to 2010. Interest income declined by 9.1% from GH 2.29 billion in 2010 to GH 2.08 billion in 2011. The downward trend in interest income and expense is in tandem with the fall in treasury bill rates during most part of the year. The rates for time deposit dropped over the period, compared to 2008-2009 with rates ranging from 14% to 20%. In 2011 the rates were between 6% and 9%. As interest margins became compressed, banks deepened diversification of their income base to related unfunded income transactions . Contribution of fees and commissions as a proportion of total income increased from 19% in 2010 to 23% in 2011. SCB, BBG, EBG and GCB together contributed 40% of the total industry net fees and commissions. A key factor the capacity of these banks is their existing relationship with larger customers and ability to leverage on the extensive network of its correspondent banks. The market is experiencing extreme fluctuations in interest rates and exchange rates. Such conditions do not augur well for business planning. To mitigate risk and exposure from these fluctuations, customers will soon demand risk mitigating products in the form of derivative investments.
Profit before tax margin

Baroda SCB ABG BBGL EBL EBG UBA CAL GTB ZBL TTB Stanbic ICB SG - SSB UGL UTB ADB PBL HFC Fidelity IBG NIB GCB BSIC FAMBL BOA MBG Industry 2011 74.5% 52.5% 51.9% 50.7% 48.2% 44.4% 41.3% 35.3% 35.2% 35.0% 34.4% 33.5% 31.1% 30.7% 24.9% 21.9% 21.8% 21.2% 20.0% 17.9% 16.1% 12.7% 10.3% 7.5% 6.1% - 38.6 % 30.6% R 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NA 2010 28.8% 46.6% 54.3% 38.1% 49.9% 29.7% 22.5% 34.4% 26.0% 33.5% 29.3% 34.2% 27.7% 20.3% 26.6% 15.6% 14.9% 30.7% 14.8% 15.7% 1.6% 27.4% -56.1% 37.8% - 51.7% 7.6% 27.2% R 12 3 1 4 2 10 17 6 16 2009 57.8% 45.9% 11.7% -13.8% 46.1% 4.2% 28.0% 43.7% 30.9% R 1 3 15 23 2 21 8 4 7 2008 39.5% 37.4% -6.3% 41.9% -64.9% 31.2% 32.6% 40.5% R 4 7 21 1 24 13 12 2 9 3 6 14 20 23 18 16 11 19 8 22 15 25 17 10 5
8 35.7% 11 4.2% 7 5.7% 13 31.4% 18 12.8% 15 -14.9% 20 14.4% 21 13.4% 9 23.8% 22 9.9% 19 15.4% 24 -44.7% 14 9.8% 26 -229.5% - 5.9% 5 25 26.4% 23 9.7% 17.7%
5 35.1% 20 39.9% 19 37.5% 6 30.6% 14 12.4% 24 -64.7% 12 18.3% 13 24.6% 10 32.6% 16 17.2% 11 36.8% 25 -57.8% 17 26.4% 26 - 124.2% 22 22.5% 9 34.5% 18 37.6% 22.7%
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Restructuring initiatives undertaken by BBGL led to an improved profit before tax margin in 2011
Net trading income contributed 81% to other income. This resulted from a significant increase in foreign exchange transactions. Income from foreign exchange transactions increased by 150% compared to that in prior year. The significant volume of transactions witnessed during the year and the depreciation of the cedi against the other foreign currencies accounted for the growth in such income. The industrys intensified credit risk management process from origination to monitoring is beginning to pay off as reflected in a decline in impairment charge by 42% in 2011. BSICs operating performance improved and is now posting a profit. The bank continued to build its loan book and generate sufficient income to cover its operating cost. BBGL shows the most improved operating performance. From losses in 2008 and
2009, it returned profit in 2010 with a PBTM of GH 85 million and further improved to GH 115 million in 2011. The improved profitability indicates that the restructuring it undertook in 2008 is beginning to yield results by reduction in impairment charges and operating expenses. NIBs margin also improved from 1.6% in 2010 to 12.7% in 2011, mainly resulting from an improvement in the credit portfolio and effectively managing the deposit rates. Net interest income grew by 48% compared to prior year while achieving a marginal reduction in operating expenses. GCB and FAMBL recorded significant decreases in PBTM. GCBs decrease is partly attributable to a 47% increase in operating expenses for the year. Administrative expenses more than tripled during the year but did not achieve a rise in income. FAMBL net loans and advances increased by only 3% however, interest income fell by 47% because no significant loans was written during the year to warrant an increase in interest income. BOAs loss continued but improved from
the deficit of GH 16million in 2010 to GH 13million in 2011. The uncertainties in 2010 over change in ownership may have taken its toll. The new ownership, rebranding of Amalgamated Bank to Bank of Africa and restructuring may have had some success in 2011 but it is yet to create a significant impact. Baroda is the most profitable in the industry but contributes only 0.5% to the overall industry. The improved profitability is an outcome of placing most part of the GH 35 million capital contribution during the year in government securities. The bank s operating model has not changed in the last five years of existence which has been very conservative in lending. As a subsidiary of one of the largest banks in India, with a global outreach in 24 countries, expertise with SMEs and experience in other African countries, the bank has the potential but is yet to establish a presence in Ghana.
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Industry Net Interest Margin (NIM) reduced from 9.3% in 2010 to 8% in 2011 mainly due to competitive pricing by banks
Net interest margin The industry experienced a significant fall in net interest margin (NIM) from 9.3% in 2010 to 8% in 2011, as compared to previous years which showed an upward trend. The decline is mainly a result of reduction in the lending rates of banks in response to the drop in the policy rate by the Bank of Ghana by 100 basis points from 13.5% in 2010 to 12.5% in 2011. The industry responded to market pressure for re-alignment of rates to reflect developments in the money market. Average lending rates of banks for the year reduced from 27.3% in 2010 to 25.9% in 2011. Rates on demand, savings and time deposits did not show a significant drop and reduced marginally from 2010 to 2011. GCB which had the highest NIM at 14.1% in 2010 saw a downturn to 9.5% in 2011. Interest expense dropped from GH103 million in 2010 to GH50 million in 2011 but the bank experienced a steep drop in interest income from GH387 million in 2010 to GH256 million in 2011. The reduction in interest income was a direct consequence of a swap of almost 50% of its loan book exposure to the public sector for government bonds. Although there is greater certainty of payments on maturity it appears that the yield on these bonds are lower than the yields from the converted loans. In common with the industry trend, FAMBL, ZBL GTB, ADB, GCB, BBGL and SCB each witnessed a fall in the net interest margin as net interest income declined across the industry. The drop in interest income was not compensated by an aggressive drive to generate income from customer credit because banks were keen to underwrite quality loans for profitable growth.
Net interest margin

TTB BSIC UTB HFC SG-SSB GCB ICB BBGL SCB Baroda GTB UGL ADB ABG EBL UBA PBL EBG Fidelity Stanbic CAL ABL IBG FAMBL NIB ZBL MBG Industry 8.0% 2011 14.1% 13.3% 12.2% 10.6% 9.6% 9.5% 9.4% 9.2% 8.9% 8.5% 8.4% 8.4% 8.3% 8.2% 7.6% 7.5% 7.2% 7.2% 6.9% 6.7% 6.6% 6.3% 6.2% 5.7% 5.0% 3.4% R 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NA 2010 12.6% 8.7% 11.0% 10.1% 10.4% 14.1% 7.9% 10.8% 9.9% 4.2% 9.2% 6.8% 12.1% 10.4% 7.2% 7.0% 7.4% 5.7% 7.4% 7.8% 5.3% 5.6% 7.1% 4.3% 5.5% 9.4% 9.3% R 2 12 4 8 7 1 13 5 9 26 11 20 3 6 17 19 16 21 15 14 24 22 18 25 23 10 2009 10.9% 6.6% 5.9% 6.3% 10.2% 7.4% 7.5% 10.2% 10.0% 13.2% 12.4% 7.9% 6.2% 9.1% 5.8% 6.2% 7.0% 5.2% 7.2% 5.7% 5.2% 5.3% 3.4% 6.2% 4.7% 9.5% 7.7% R 3 14 19 15 5 11 10 4 6 1 2 9 18 8 20 17 13 23 12 21 24 22 26 16 25 7 2008 10.1% 17.2% 11.6% 6.1% 9.5% 9.4% 7.1% 8.6% 8.7% 19.4% 5.5% 9.6% 7.2% 5.2% 6.6% 5.8% 3.8% 7.5% 5.7% 6.6% 5.8% 3.7% 6.4% 6.1% 9.5% 6.6% R 4 2 3 17 6 8 13 10 9 1 22 5 12 23 15 20 24 11 21 14 19 25 16 18 7
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Restructuring activities and increased staff cost led to an increases in industry Cost Income ratio in 2011
Cost income ratio (CIR) Operating expenses across the industry increased from GH1.2 billion in 2010 to GH1.4 billion in 2011. Employee benefits is the largest operating cost component, contributing 45% (2010: 47%) to operating expenses. With the decline in interest margin, the general trend in the industry among others has been greater discipline in cost management to reduce the cost of operations. Ultimately the reduction will have a positive impact on the cost of funds and the lending rates. SCB, BBGL and NIB were successful with cost reduction. The decreases were in the area of administrative expenses. FAMBL, ADB, GCB and BOA are at various stages of a transformation or restructuring to improve operating performance and efficiency. As a consequence the banks have incurred significant one off costs including redundancy and rebranding to align the business to new operating model. BSIC recorded the most improved CIR, with a reduction from 149% in 2010 to 84% in 2011. Over the four year period from 2008, the start up bank has gradually become profitable. With the expected growth in the industry, staff cost will continue to be key in maintaining CIR because of the competitive remuneration to attract and retain staff. As banks develop new products to meet their customer needs, support in the form of technology and expertise will increase. More so, the threat of the weaker Ghana Cedi may aggravate the related cost for imported services.
Cost income ratio

2011 Baroda SCB ABG UBA TTB BBGL CAL NIB EBL EBG Stanbic IBG GTB ZBL ICB UTB Fidelity SG-SSB HFC UGL PBL FAMBL ADB BSIC GCB BOA MBG Industry 0.3 0.4 0.4 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.6 0.6 0.6 0.6 0.7 0.7 0.7 0.7 0.7 0.8 0.8 0.8 0.9 0.9 . 0.6 R 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NA 2010 0.5 0.5 0.4 0.6 0.4 0.6 0.5 0.7 0.5 0.6 0.6 0.6 0.6 0.6 0.6 0.7 0.7 0.6 0.8 0.8 0.5 0.5 1.5 0.5 0.9 0.5 0.6 R 19 22 26 12 25 11 17 6 23 14 9 16 13 10 15 5 7 8 4 3 24 18 1 20 2 21 2009 0.4 0.5 0.8 0.8 0.5 0.8 0.6 0.8 0.5 0.6 0.6 0.5 0.5 0.7 1.2 0.8 0.6 0.7 0.9 0.8 0.9 0.7 3.2 0.7 0.6 0.4 0.6 R 1 3 20 21 7 18 10 17 4 8 12 5 6 16 25 22 11 14 24 19 23 13 26 15 9 2 2008 0.6 0.6 1.5 0.5 0.8 0.6 0.8 0.5 0.5 0.6 0.6 0.6 0.6 0.9 0.8 0.6 0.6 0.9 0.7 0.6 0.7 2.2 0.6 0.6 0.4 0.6 R 8 11 NA 24 3 20 14 19 4 2 5 12 6 13 23 21 10 7 22 17 16 18 25 15 9 1
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Return to shareholders
Industry return on equity higher than ROE of key global market players
Return to shareholders The rapid growth in shareholders funds appears to ease as 18 of the 26 banks met the minimum capital. In 2010, shareholdersfunds grew by 29% and this rate of growth fell to 19% in 2011. Shareholders equity increased by GH 484 million in 2011 due to the combined effect of GH 280 million capital injection and GH 204 million in the form of statutory or reserves retained by the bank reserves. Although net interest income dipped ,profit after tax increased by 28% from GH 399 million in 2010 to GH 512 million in 2011. The banks sustained profitability by growing unfunded income and maintaining cost discipline during the period. Overall the industry's ROE improved from 16.6% to 17.9%. SCB, BBGL and EBG had the highest returns for the year , in comparison with their reported overall groups operating performance. These subsidiaries of multinational banks posted very strong returns on equity;
Return on equity
SCB EBG BBGL UBA UTB ZBL IBG UGL CAL ADB PBL Fidelity Stanbic SG-SSB TTB HFC GTB GCB NIB ABG ICB Baroda EBL BSIC FAMBL BOA MBG Industry 2011 33.4% 27.9% 26.2% 23.8% 21.3% 21.3% 21.0% 20.6% 19.7% 19.0% 17.5% 17.5% 15.9% 15.2% 14.8% 13.4% 13.2% 9.8% 9.0% 8.6% 6.8% 4.1% 5.7% 3.1% 2.0% - 31.1% 17.9% R 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 23 22 24 25 26 NA 2010 36.8% 26.8% 24.5% 12.9% 19.4% 12.6% 6.5% 11.8% 11.5% 23.2% 10.3% 13.1% 17.4% 16.7% 11.9% 10.9% 12.0% 22.6% 3.7% 9.6% 7.0% 1.8% -17.4% 33.8% - 452.5% 7.5% 16.6% R 1 3 4 11 7 12 22 15 16 5 18 10 8 9 14 17 13 6 23 19 21 24 2009 36.0% 26.4% -11.2% 1.1% -21.1% 16.9% 14.3% 12.7% 15.6% 10.4% 13.8% 6.4% 1.2% 17.8% 27.5% 17.2% 13.8% 9.1% - 38.2% 0.6% 0.7% 10.4% R 1 3 23 19 24 7 9 12 8 13 10 17 18 5 2 6 11 16 25 21 20 14 26 22 4 15 2008 37.1% 41.6% -6.0% -82.0% -41.2% 24.5% 46.1% 8.4% 22.5% 13.7% 27.6% 24.5% 32.2% 22.3% 32.5% 20.8% 37.7% 18.2% - 85.2% 22.4% 5.0% -21.0% 26.6% 29.2% 42.5% 18.5% R 5 3 21 24 23 12 1 19 13 18 9 11 7 15 6 16 4 17 25 14 20 22 10 8 2
25 -122.9% 2 - 9.5% 26 24.1% 20 10.0% 10.5%
Bank
Standard Chartered Bank Ecobank Bank Barclays Bank
Local entity
33.4% 27.9% 26.2%
Group
12.2% 15.9% 6.9%
(source: culled from published consolidated)
The consistent favourable returns shown locally by SCB, BBGL and EBG is an outcome of established and committed relationships with customers to sustain profitability.
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GCB and FAMBL have suffered a steep decline in their return to the shareholders
The Bank of Africa made no returns to shareholders in the last two years because it recorded losses of GH 13 million and GH16 million in 2010 and 2011 respectively. GCB and FAMBL have each suffered a steep decline in their return to the shareholders because they were unable to sustain the prior years profit after tax which dropped by 70%. The improvement in ROE and ROA over the years did not lead to an improvement in the dividend paid to shareholders. 30% of the profit after tax was paid as dividend for 2009 in 2010. This dropped to 23% as dividend paid for 2010 in 2011. With the increase in capital, banks are setting aside a greater amount to meet the statutory reserve requirements. The industry will soon come under pressure for increase in dividend as institutional and private investors seek returns from their investments. In view of the threat of compression in interest margin, care must be taken to ensure that the banks can maintain their profit levels without necessarily increasing interest rates as this could stifle further credit in the financial market.
Return on assets
BBGL SCB UBA TTB ZBL EBG GTB ABG Baroda ADB SG-SSB Stanbic CAL HFC ICB UGL UTB EBL PBL IBG BSIC Fidelity NIB GCB FAMBL BOA MBG Industry 2011 4.4% 3.9% 3.9% 3.6% 3.4% 3.3% 3.1% 3.0% 2.9% 2.8% 2.7% 2.5% 2.3% 2.3% 2.1% 1.8% 1.8% 1.8% 1.5% 1.1% 1.0% 0.9% 0.9% 0.7% 0.5% - 3.5% 2.4% R 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NA 2010 3.6% 4.3% 2.3% 3.1% 1.7% 3.9% 2.8% 4.2% 0.8% 3.3% 2.8% 2.2% 1.8% 2.1% 2.4% 1.2% 1.9% 1.0% 1.0% - 5.3% 0.7% 0.3% 2.6% 3.4% 4.0% 0.6% 2.3% R 4 1 12 7 17 3 9 2 21 6 8 13 16 14 11 18 15 19 20 26 22 24 10 5 25 23 2009 -1.4% 4.1% 0.3% 3.6% 2.2% 3.9% 4.3% 0.5% 5.7% 1.7% 3.3% 0.1% 2.0% 2.1% 0.3% 1.1% - 1.5% 1.0% 1.5% - 17.1% 0.6% - 4.3% 0.9% 0.4% - 1.9% 0.8% 1.4% R 23 3 19 5 7 4 2 18 1 11 6 21 9 8 20 13 24 14 12 26 17 25 15 22 10 16 2008 -0.5% 3.4% -3.2% 3.8% 2.5% 3.9% 2.2% 3.5% 2.4% 3.6% 3.2% 2.4% 1.5% 3.2% 1.3% - 9.1% 1.6% 3.6% - 11.8% 1.1% - 6.9% 2.2% 0.7% 2.3% 5.2% 1.9% R 21 7 22 3 10 2 15 6 11 5 8 12 17 9 18 24 16 4 25 19 23 14 20 13 1
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Profit after tax has consistently improved despite the global and euro zone crisis.
Profit after tax margin
Baroda BBGL SCB EBL ABG ZBL UBA EBG CAL GTB Stanbic TTB SG-SSB ADB HFC ICB UGL UTB PBL Fidelity NIB Intercont BSIC GCB FAMBL BOA MBG Industry 2011 51.7% 36.5% 35.7% 35.3% 33.7% 31.6% 30.6% 30.3% 26.3% 23.3% 22.6% 22.6% 21.5% 20.4% 20.0% 19.4% 18.0% 16.5% 14.9% 12.2% 10.1% 7.6% 7.5% 5.8% 4.4% -38.6% 21.6% R 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NA 2010 22.9% 26.4% 33.1% 37.5% 17.3% 19.6% 33.0% 17.0% 24.0% 19.1% 21.8% 20.0% 14.9% 19.1% 23.7% 14.1% 21.7% 10.8% 10.5% 4.0% 8.3% -56.1% 16.8% 25.0% -53.1% 4.7% 18.3% R 8 4 2 1 15 12 3 16 6 13 9 11 18 2009 42.9% -10.9% 31.5% 7.1% 20.7% 2.6% 34.4% 22.7% 31.3% 1.3% 25.3% 22.5% 13.6% R 1 23 3 17 8 20 2 6 4 21 5 7 11 9 19 14 24 13 16 25 12 26 15 22 10 18 2008 31.5% -4.5% 28.3% 30.6% -64.9% 32.4% 24.0% 27.3% 28.0% 25.6% 21.8% 18.3% 23.5% 28.2% 9.5% -67.2% 16.3% 15.8% -58.5% 28.1% -124.2% 19.9% 16.0% 25.6% 29.0% 16.7% R 2 21 5 3 23 1 12 9 8 10 14 16 13 6 20 24 17 19 22 7 25 15 18 11 4
14 19.5% 7 3.5% 19 10.2% 10 -19.0% 20 11.5% 21 7.9% 24 -49.1% 22 12.2% 26 -229.5% 17 9.0% 5 -8.0% 25 19.5% 23 6.4% 12.4%
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Asset quality
There was a remarkable improvement in the quality of industry loan portfolio in 2011 primarily due to improved credit monitoring
The quality of industry loan portfolio in 2011 showed a remarkable improvement relative to the same period last year. Even though gross loans and advances increased by 18% from GH 7.7 billion 2010 to GH9.2 billion in 2011, impairment charge plummeted by 42.6% from GH 362 million to GH 207 million over the same period. Impairment charge as a percentage of gross loans and advances also declined from 4.7% in 2010 to 2.3% in 2011. The decline is an outcome of the deliberate attempt by management to enhance credit administration which include origination, monitoring and aggressive remediation for defaulting customers. The benefits of the collateral registry and credit reference bureau introduced in prior year is beginning to emerge. GCB, ADB, BBGL, SCB and CAL experienced a significant drop in impairment charge during the year. In the effort to clean up the loan book these banks were very aggressive in recognising provision for impaired loans. This has yielded positive results as these banks further strengthened origination and monitoring of credit. IBG, UTB, GT, BSIC and UBA suffered worse impairment charge this year. The deterioration in the loan book of these banks is an outcome from the aggressive underwriting they took during the start up phase. As they develop better credit history of the market segment of their customers the quality of the loan book is likely to improve.
Impairment charge/ gross loans and advances

ADB Baroda SG-SSB UGL EBG BBGL HFC EBL ABG PBL SCB GCB ZBL CAL ICB BSIC Fidelity FAMBL UTB Stanbic GTB NIB TTB UBA BOA IBG MBG Industry 2011 -1.1% -0.2% 0.2% 0.7% 0.7% 0.9% 0.9% 1.0% 1.0% 1.1% 1.6% 1.7% 1.9% 2.6% 2.7% 2.7% 2.7% 2.8% 2.9% 3.2% 4.4% 4.5% 4.6% 5.1% 7.2% 8.9% 2.3% R 2010 1 11.8% 2 5.1% 3 2.0% 4 0.2% 5 6 7 8 9 10 11 12 13 14 1.1% 3.8% 1.0% 3.4% 0.7% 2.7% 6.3% 3.1% 4.7% R 25 22 7 1 4 16 3 15 2 10 23 12 19 5 6 9 13 8 14 11 18 20 21 24 17 26 2009 3.6% 1.0% 1.4% -0.3% 2.0% 9.8% 1.1% 4.0% 0.8% 3.5% 2.8% 5.2% 1.5% 6.2% 2.1% 0.9% 2.6% -0.2% 10.9% 2.0% 7.9% 2.4% 8.6% 2.7% 5.0% 9.6% 4.4% R 17 5 7 1 9 25 6 18 3 16 15 20 8 21 11 4 13 2 26 10 22 12 23 14 19 24 2008 1.7% 2.5% 2.1% 0.4% 1.4% 6.0% 1.6% 0.4% 0.4% 0.8% 0.9% 1.1% 0.1% 0.1% 1.1% 12.2% 1.8% 2.0% 12.5% 2.7% 3.2% 1.1% 1.7% 5.4% 2.7% R 13 18 17 5 11 22 12 4 3 6 7 8 1 2 9 23 15 16 24 19 20 10 14 21
15 1.5% 16 1.7% 17 2.7% 18 3.2% 19 2.0% 20 3.2% 21 2.9% 22 4.4% 23 5.0% 24 5.0% 25 9.6% 26 4.3% NA 17.6% 4.7%
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10
Liquidity
Balancing liquidity to maximise profitability requires a deep strategic thought

The favourable macro economic condition of low inflation and fall in the Monetary Policy Committee (MPC) policy rate did not stimulate the expected increase in lending activity during 2011. Overall, the industry s liquid assets to deposits ratio fell marginally by 2%, indicating that banks did not significantly change their strategy over the past year. Key players in the industry remained risk averse and held funds in money market securities. Baroda continues to holds significant part of the liquid assets in Government securities. ABGs liquid assets in Government securities constitutes 56% of the operating assets. Unlike previous years the bank is gradually moving away from its conservative approach to lending towards an increasing appetite for investment in risky assets. This is evidenced by a six fold growth in the banks loan portfolio over the review period. UTB dropped by 0.27 basis points, investing in more risky assets. The growth in the loan portfolio by 50% compared to 2010, sounds how the bank wants to be noted as the SME bank. UGL and NIB continue to remain as the least liquid banks. These two banks appeared to be more willing to take on risks by lending, rather than placing funds in less risky assets. Most of their lending is in the SME sector. GCB over the past three years has consistently recorded liquidity ratios below the industry average but saw an upward movement by 0.26 basis points. This is attributed to the conversion of the TOR debt to bonds and also maintaining more liquidity to avoid any challenges in meeting their funding requirements in the short and medium term.
Liquid funds/ total deposits

Baroda EBL ABG GTB ICB GCB SCB UBA ZBL BBGL HFC EBG SG-SSB Fidelity BSIC Stanbic BOA CAL IBG FAMBL TTB ADB PBL NIB UTB UGL MBG Industry 2011 3.61 1.72 1.13 1.12 1.03 0.90 0.86 0.84 0.83 0.81 0.70 0.68 0.66 0.65 0.64 0.63 0.58 0.57 0.56 0.53 0.51 0.50 0.48 0.44 0.37 0.31 0.71 R 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NA 2010 1.66 1.85 0.88 1.35 0.64 0.99 0.92 0.65 0.86 0.83 0.79 0.68 0.75 0.64 0.68 0.50 0.71 0.53 0.50 0.59 0.55 0.43 0.51 0.64 0.37 0.83 0.73 R 2 1 6 3 17 4 5 15 7 9 10 14 11 18 13 24 12 21 23 19 20 25 22 16 26 8 2009 2.04 10.29 0.87 1.52 0.44 1.06 1.10 0.74 0.68 0.52 0.82 0.57 0.59 0.30 0.65 0.50 0.77 0.49 0.44 0.52 0.59 0.49 0.44 0.61 0.41 0.65 0.67 R 2 1 6 3 23 5 4 9 10 17 7 16 15 26 12 19 8 20 22 18 14 21 24 13 25 11 2008 2.89 0.75 0.84 0.43 0.55 0.78 0.69 0.44 2.01 0.58 0.41 0.80 1.82 0.46 0.52 0.70 0.35 0.57 0.43 0.47 0.53 0.28 0.41 0.28 0.32 0.52 R 6 3 17 11 5 8 16 1 9 19 4 2 15 13 7 21 10 18 14 12 24 20 23 22
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Balancing liquidity to maximise profitability requires a deep strategic thought Baroda and ABG adopts a conservative approach to lending
EBG has shown a declining trend in their liquidity over the past three years. This trend suggests the bank is more aggressive to lending opportunities. Relative to prior year, the bank grew its loan portfolio by 66% ,suggesting an appetite to take on more risky investments. GTB has demonstrated a consistent increase in its liquid funds to deposits. The growth in the banks liquid assets over the period appears to be supported by a more conservative approach to lending rather than attractiveness of returns on less risky investments. Baroda, EBL, ABG and GTB held assets in excess of their obligations towards interest bearing liabilities. As new market entrants, EBL and ABG holdings will be diluted as investment opportunities are identified. Baroda has maintained the same risk averse market approach and is not expected to change. UTB remained the most illiquid bank in 2011. The industry ratio of liquid funds to total interest bearing liabilities shows a similar growth trend compared to the trend exhibited by the industry with respect to liquid funds to total assets and liquid funds to total deposits. The increase is at a slower pace compared to prior year: 66.9% ( 2011) and 66.2%(2010).
Liquid funds/ total interest bearing liabilities Baroda EBL ABG GTB GCB ICB UBA ZBL SCB BBGL EBG BSIC SG SSB Fidelity Stanbic BOA HFC Intercont FAMBL CAL TTB PBL ADB NIB UTB UGL MBG Industry 2011 292.4% 141.2% 108.6% 90.8% 86.4% 86.2% 84.3% 83.4% 80.9% 80.5% 64.2% 64.0% 64.0% 62.1% 61.8% 55.2% 55.1% 54.8% 52.2% 49.2% 47.4% 46.1% 42.1% 41.5% 35.4% 29.8% R 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NA 2010 151.1% 164.5% 82.4% 61.2% 106.6% 92.1% 65.2% 80.4% 84.9% 74.1% 63.8% 64.9% 69.6% 65.8% 47.9% 54.7% 52.3% 46.9% 51.8% 54.3% 41.1% 38.8% 41.0% 61.5% 35.5% 76.6% 66.2% R 2 NA 1 6 16 3 4 12 7 5 9 14 13 10 11 21 17 19 22 20 18 23 25 24 15 26 8 2009 204.2% 595.9% 86.8% 34.5% 112.3% 109.6% 74.1% 79.7% 67.0% 75.8% 30.4% 52.7% 54.5% 62.9% 49.5% 34.0% 47.2% 42.5% 58.0% 48.0% 41.8% 48.8% 32.0% 60.9% 40.2% 54.2% 58.6% R 2 NA 1 5 23 3 4 8 6 9 7 26 15 13 10 16 24 19 20 12 18 21 17 25 11 22 14 2008 289.0% R 1 NA NA 5 18 6 4 7 10 14 11 2 20 8 15 12 3 22 9 16 19 13 21 25 17 24 23
75.4% 39.3% 72.7% 77.6% 68.8% 53.4% 43.8% 53.2% 182.0% 36.5% 62.1% 43.1% 51.1% 123.5% 34.9% 57.0% 42.1% 38.7% 45.8% 35.4% 19.7% 40.9% 27.2% 27.4% 47.3%
66.9%
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UTB and UGL take on risk by lending, rather than placing funds in less risky assets
Liquid funds/ total assets

EBL Baroda GCB ZBL UBA GTB ABG SCB BBGL ICB Fidelity EBG Stanbic SG-SSB Intercont BOA HFC CAL BSIC PBL NIB FAMBL ADB TTB UGL UTB MBG Industry 2011 0.92 0.83 0.75 0.69 0.68 0.67 0.67 0.65 0.64 0.59 0.57 0.55 0.51 0.49 0.48 0.44 0.44 0.42 0.41 0.40 0.36 0.36 0.35 0.33 0.26 0.18 R 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NA 2010 0.86 0.48 0.55 0.71 0.61 0.86 0.65 0.67 0.69 0.64 0.62 0.56 0.49 0.40 0.44 0.42 0.41 0.42 0.36 0.35 0.39 0.29 0.36 0.31 0.23 0.68 0.52 R 2 14 12 3 10 1 7 6 4 8 9 11 13 19 15 17 18 16 21 23 20 25 22 24 26 5 2009 0.69 0.29 0.63 0.81 0.55 0.77 0.64 0.53 0.69 0.48 0.60 0.54 0.38 0.38 0.44 0.28 0.48 0.24 0.36 0.27 0.38 0.34 0.37 0.35 0.48 0.47 0.47 R 3 23 6 1 8 2 5 10 4 12 7 9 17 18 15 24 13 26 20 25 16 22 19 21 11 14 2008 0.85 0.30 0.59 0.75 0.68 0.42 0.38 0.60 0.57 0.44 0.37 0.28 0.31 0.45 0.57 0.36 0.66 0.37 0.17 0.51 0.24 0.30 0.22 0.26 0.23 0.38 R 1 19 6 2 3 12 13 5 7 11 14 20 17 10 8 16 4 15 25 9 22 18 24 21 23
0.54
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Our profile
About us
PwC provides industry-focused assurance, tax, and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 169,000 people in 158 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice. Our key service offerings We organise our service offerings into Lines of Service, with highly qualified, experienced professionals, who have industry specific experience and focus: Assurance providing solutions to organisations financial control, regulatory reporting, shareholder value and technology issues Advisory providing comprehensive financial, economic, and strategic advice to organisations with complex business problems Tax formulating effective strategies for optimising taxes, implementing innovative tax planning, and effectively maintaining compliance.
Our approach to delivering these services involves developing deep expertise and understanding of the industries in which our clients operate. We have established specialised groups of consultants and advisers covering the following key sectors:

Financial Services Government Services Consumer and Industrial Products and Services Energy and Mining Telecoms Infrastructure Transport airports/aviation, seaports, road and rail
From these strategically located offices, we provide a range of professional business advisory services to Governments, Non-Governmental Organisations, International Funding Institutions and leading global and national companies. Our permanent offices in Africa can be found in: In Ghana, PwC Ghana is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity. PwCs global network provides us with a broad resource base of in-depth knowledge, methodologies and experience that we use to provide value for our clients. PwC Ghana is located in Accra and Takoradi, with over 180 employees and seven resident Partners/Directors. We offer professional services to both the private and public sectors in Ghana in the following industries: From Ghana, the firm services clients located in or with business and development interests in Sierra Leone, Liberia, and The Gambia. Part of our proud achievements include the prominent roles we have played in supporting governments to implement challenging major reform initiatives across the continent. For instance, we have advised on public sector institutional restructuring and organisational development, public sector reform, liberalisation and privatisation of utilities and infrastructure sectors, liberalisation of financial markets, and modernisation of tax, customs and exchange control regimes.
In Africa, PwC firms have established 58 permanent offices employing more than 6,000 professional staff located in 31 countries. we believe that we are the only professional services firm that can offer the highest level of quality services in every country in Africa.
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Our leadership team
Felix Addo Country Senior Partner 0302 761614 felix.addo@gh.pwc.com Wyczynsky Ashiagbor Partner, Advisory 0302 761465 vish.ashiagbor@gh.pwc.com
Michael Asiedu-Antwi Partner, Assurance 0302 761533 michael.asiedu-antwi@gh.pwc.com Darcy White Partner, Tax 0302 761576 darcy.white@gh.pwc.com
Oseini Amui Partner, Assurance 0302 761449 oseini.x.amui@gh.pwc.com
George Kwatia Partner, Tax 0302 761459 george.kwatia@gh.pwc.com Maxwell Darkwa Partner, Assurance 0302 761471 maxwell.darkwa@gh.pwc.com
Ghana Association of Bankers Dan Mensah Executive Secretary 4th Floor, SSNIT Tower Block (Near Pension House) Accra P.O.Box 41, Accra Ghana Phone: +233 (0302) 670629 Telefax: +233 (0302) 667138 Email: assbankers@ighmail.com
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12
Glossary
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, equity investments in subsidiaries and associated companies Loan 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 and services, publicity and marketing expenses Non-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, including prepayments, sundry debtors and accounts receivable Operating assets include cash and liquid assets, loans and advances, and any other asset that directly generates interest or fee income
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Glossary of key financial terms, equations and ratios

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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List of abbreviations
ABG ADB Baroda BBGL BOA BOG BSIC CAL DPS EBG EGL EPS FAMBL FBL GCB GDP GTB HFC IBG ICB Access Bank (Ghana) Limited Agricultural Development Bank Limited Bank of Baroda Limited Barclays Bank of Ghana Limited Bank of Africa Bank of Ghana Sahel -Sahara Bank Limited CAL Bank Limited Dividend per share Ecobank Ghana Limited Energy Bank (Ghana) Limited Earnings per share First Atlantic Merchant Bank Limited Fidelity Bank Limited Ghana Commercial Bank Limited Gross Domestic Product Guaranty Trust Bank (Ghana) Limited HFC Bank (Ghana) Limited Intercontinental Bank Ghana Limited International Commercial Bank Limited IFRS MBG NIB PAT PBL PBT PwC ROA ROCE ROE SCB SG-SSB Stanbic TTB UBA UGL UTB ZBL International Financial Reporting Standards Merchant Bank Ghana Limited National Investment Bank Limited Profit after tax Prudential Bank Limited Profit before tax PricewaterhouseCoopers (Ghana) Limited Return on assets Return on capital employed Return on equity Standard Chartered Bank Ghana Limited SG-SSB Bank Limited Stanbic Bank Ghana Limited The Trust Bank Limited United Bank for Africa (Ghana) Limited UniBank Ghana Limited UT Bank Limited Zenith Bank (Ghana) Limited
PwC
55
Participating banks
24 out of the 25 banks currently operating in the country participated in this years survey as listed in the table below. Name of bank Access Bank (Ghana) Limited Agricultural Development Bank Limited Bank for Africa Bank of Baroda (Ghana) Limited Barclays Bank of Ghana Limited BSIC (Ghana) Limited CAL Bank Limited Ecobank Ghana Limited Energy Bank (Ghana) Limited Fidelity Bank Limited First Atlantic Merchant Bank Limited Ghana Commercial Bank Limited Guaranty Trust Bank (Ghana) Limited HFC Bank Ghana Limited International Commercial Bank Limited Merchant Bank Ghana Limited National Investment Bank Limited Prudential Bank Limited SG-SSB Bank Limited Stanbic Bank Ghana Limited Standard Chartered Bank Ghana Limited UniBank (Ghana) Limited United Bank for Africa (Ghana) Limited UT Bank Limited Zenith Bank (Ghana) Limited Year of incorporation 2008 1965 1997 2007 1917 2008 1990 1990 2010 2006 1994 1953 2004 1990 1996 1971 1963 1993 1975 1999 1896 1997 2004 1995 2005 Majority ownership Foreign Local Foreign Foreign Foreign Foreign Local Foreign Foreign Local Local Local Foreign Local Foreign Local Local Local Foreign Foreign Foreign Local Foreign Local Foreign Number of branches 31 91 20 1 92 11 18 78 3 31 7 157 22 24 17 22 27 32 45 23 35 19 32 24 26 Chief Executive Officer (As at July 2012) Dolapo Ogundimu Stephen Kpordzih Kobby Andah Arvind Kumar Benjamin Dabrah Robert Kow Bentil Frank Adu Jr. Samuel Ashitey Adjei Mr. Sam Ayininuola Edward Effah Martin Ofori Simon Dornoo Lekan Sanusi Asare Akuffo Sanjeev Anand Joseph Tetteh P.A. Kuranchie Stephen Sekyere Abankwa Gilbert Hie Alhassan Andani Kweku Bedu-Addo Felix Nyarko-Pong Oliver Alawuba Prince K. Amoabeng Daniel Asiedu
PwC
56
pwc.com/gh
This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers (Ghana) Ltd, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. 2012 PricewaterhouseCoopers (Ghana) Ltd. All rights reserved. In this document, PwC refers to PricewaterhouseCoopers (Ghana) Ltd, which is a member firm of PricewaterhouseCoopers International Limited, each of which is a separate legal entity.

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2012 Ghana Banking Survey

A message from our CSP

2012 Ghana Banking Survey

A message from the Executive Secretary of the Ghana Association of Bankers

D. K. Mensah Executive Secretary of the Ghana Association of Bankers

2012 Ghana Banking Survey

Enhancing customer value to sustain profitable growth

2012 Ghana Banking Survey

Drivers/ Levers of Change

2012 Ghana Banking Survey

Corporate/ Institutional Banking

Mid-tier Income Retail Banking High Networth Retail Banking

2012 Ghana Banking Survey

Oil & Gas

2012 Ghana Banking Survey

2012 Ghana Banking Survey

2012 Ghana Banking Survey

Q5. After capitalization what is the next immediate step?

Liability driven Expansion

2012 Ghana Banking Survey 2012 Ghana Banking Survey

Overview: the economy

8.0% 4.0% 2009 2010 2011

Source: Ghana Statistical Service

2012 Ghana Banking Survey

Headline inflation and interest rate

35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2008

2012 Ghana Banking Survey

Foreign exchange rate

Ghana Stock Exchange

2012 Ghana Banking Survey

Overview: the industry

Industry developments in 2011- Banking regulatory and supervisory framework

2012 Ghana Banking Survey

2012 Ghana Banking Survey

29% 29% 26% 23%

(Source: Bank of Ghana Statistical Bulletin )

2012 Ghana Banking Survey 2012 Ghana Banking Survey 21

Second Quartile Group (Q2)

Third Quartile Group (Q3)

Fourth Quartile Group (Q4)

2012 Ghana Banking Survey

First Quartile Banks - Profit before tax margin

First Quartile Banks - Return on equity

First Quartile Banks - Impairment allowance/gross loans and advances

25% 20% 15% 10% 5% 0% GCB EBG

First Quartile Banks - Share of industry advances

EBG now has the largest exposure to customers in the market.

2012 Ghana Banking Survey 2012 Ghana Banking Survey

First Quartile Banks - Share of industry deposits

First Quartile Banks - Cost income ratio

Second Quartile Banks - Profit before tax margin

Second Quartile Banks - Return on equity

Return on equity for NIB significantly improved compared to 2008.

2012 Ghana Banking Survey

Second Quartile Banks - Impairment allowance / gross Loans and advances

Second Quartile Banks - Share of industry advances

Fidelity and CAL made significant inroads in gaining market 1% share.

Second Quartile Banks - Share of industry deposits