About 16 banks will record more losses this year as a result of the Domestic Debt Exchange Programme.
According to research conducted by Dr. Richmond Atuahene and K.B. Frimpong, the uncaptured losses of nearly 17.1 billion could impact negatively the 2023 Audited Financial Statements of 16 banks that did not capture the entire losses in 2022.
Out of the 22 banks, only six banks (Absa, Stanbic, Standard Chartered Bank, FNB, Zenith) managed to capture fully the impairment losses in 2022. The rest of the losses would have to be captured before the banks submit their recapitalization as requested by the International Monetary Fund Country Report on Ghana.
The 16 banks are expected to include the remaining impairment losses of about 17.1 billion in their 2023 Audited Financial Statement, which could also impact negatively their Capital Adequacy Ratio and profitability indicators ((Return on Equity and Return on Assets).
Banks recorded impairment losses of ¢19.4bn in 2022
The 22 banks recorded impairment losses of about ¢19.4 billion in 2022 as a result of the DDEP. This impacted their profitability.
Eight banks Capital Adequacy Ratio - which measures the banks’ accessible capital expressed as a percentage of a bank’s risk-weighted assets and liabilities - is now below 13%.
Furthermore, the report stated that DDEP impairment losses that have affected the CAR of some banks could adversely affect their capacity to lend and dampen credit to private sector and economic activity.
The 2022 Audited Financial Statements of the 22 banks, according to the report, reflected only a partial impact of the Domestic DDEP losses and the challenging operating environment that prevailed in the year. Most banks reported significant losses on the back of the mark-to-market valuation losses on their respective holdings in the Government of Ghana bonds following the implementation of the DDEP.
BoG urged to periodically monitor expected shortfalls
The report therefore urged the Bank of Ghana to periodically monitor the expected capital shortfalls and ensure the plans on rebuilding capital buffers are implemented.
“Further incentives to banks to expedite the process will include the prohibition of distributing dividends, restrictions in risk exposures, and enhanced monitoring for those that do not meet the minimum CAR, and support for early recapitalization from the Ghana Financial Stability Fund”, it added.
In 2022, the banks recorded a loss of 6.6 billion, relative to a profit of 4.8 billion in 2021.
Only six banks (GT Bank, Societe Generale, FBN, UBA, First Atlantic and Bank of Africa) recorded profits.
The report continued that the total losses of the 22 banks as a result of DDEP is estimated at ¢37.7 billion using the Net Present Value of 16%.
Only ¢19.2 billion has so far been written off. Therefore, there is outstanding losses of ¢17.5 billion that will have to be captured in the 2023 financial year.
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