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Consolidated Bank Ghana (CBG) is working to reduce the level of non-performing loans (NPLs) to single digit during the year.
That, the bank intends to achieve by tightening is risk management systems and engaging its clients, particularly, the small and medium scale enterprises (SMEs), which are a core of the bank’s focus.
“We closed last year with NPLs of 15% but we are beginning to see some major signs which points to a massive reduction. From what we see, we strongly anticipate 7% NPLs in the coming months,” the Managing Director of CBG, Daniel Wilson Addo told journalists in Accra.
Asset quality risks elevated in October 2023, reflecting the pickup in the NPL stock and NPL ratio during the period.
According to the Monetary Policy Committee of the Bank of Ghana (BoG) report from October last year, the industry’s NPL ratio increased to 18.3% in October 2023, from 14.0% in October 2022 on account of a higher growth in the NPL stock and a contraction in gross loans during the review period.
Similarly, the NPL ratio adjusted for the fully provisioned loan loss category increased from 3.9 percent to 6.4 percent during the same comparative period.
The NPL stock increased by 18.8% to GH¢13.5 billion in October 2023 from GH¢11.3 billion in October 2022, reflecting a deterioration in domestic currency loans.
The private sector accounted for the largest share of non- performing loans of 93.8 percent in October 2023, marginally lower than the share of 95.0 percent recorded in October 2022.
The share of public sector NPLs however, rose to 6.2%, from 5.0% a year ago.
The CBG Managing Director admitted to the challenges within the economy and how it had impacted businesses, hence the high loan default.
He was however, optimistic that the measures put in place by the bank coupled with its focus on SMEs, the rate of NPLs will reduce in the coming months and into the year.
Asked why he bank was exposed to some state owned-enterprises (SOEs) which were not performing such as Electricity Company of Ghana, Metro Mass Transit among others, Mr Addo said much as the bank was aware of their financial position, the arrangements with them has not resulted in defaults.
“Yes we know these SOEs are struggling but first, our exposure in terms of our loan book, is small. Besides, our arrangements with them is such that, they cannot default and I am happy to say that, they are honouring their obligations accordingly, hence no cause for alarm,” he assured.
CBG announced it has received a GH¢2.5 billion capital injection from its sole shareholder, the government, as part of measures to position it for growth and restore balance sheet resilience.
The bank secured the fresh capital in December last year through funds from the Ghana Financial Sector Fund (GFSF) bond.
By this, the bank — formed some five years ago through the amalgamation of seven defunct banks during the country’s financial sector crisis — becomes one of the first among the commercial banks in the country to access funds from the Ghana Financial Sector Fund (GFSF) created to support banks whose balance sheets were impaired as a result of the implementation of the Domestic Debt Exchange Programme (DDEP).
The support makes CBG more solvent and liquid to discharge its core mandate of financial intermediation.
Mr Addo said after a press interaction in Accra last Tuesday that “the bank is, therefore, ideally positioned to continue its growth trajectory and, most importantly, to continue to make a positive impact on the economy”.
Through the funding, he said, the bank would deepen support for small and medium enterprises (SME) and also provide funding for the agricultural sector, with a big ticket transaction already in the offing.
Mr Addo said the bank had already been supporting SMEs, but would ramp up support for them from this year.
Meant to unlock the potential of two of the most important sectors of the economy in line with government’s overall ambitions for the year, the move by CBG, Mr Addo said, was also expected to boost food production to contain inflation, ensure food security and expand exports, as well as create jobs for the mass of the people while providing a source of financial livelihood for small businesses which were in dire need of capital.
Throwing more light on the SME sector, Mr Addo said CBG had played a pivotal role in providing as much as GH¢1.6 billion in loans to over 5,600 businesses; introduced innovative programmes such as the ‘CBG SME Loan Adesua series and optimised loan processing for swift access.
“The initiatives in the SME sector have earned the bank various awards, including the Euromoney Award for SME Market leadership in 2022 and 2023.”
He said in corporate and institutional banking segment, CGB had participated in syndicated loans totalling GH¢2.35 billion, either as a lead arranger or transaction advisor, benefiting crucial sectors such as energy, tourism and education.
Mr Addo said: “In the immediate future, CBG would deepen investment in digitisation, upscale support to SMEs, further prioritise customer service and ensure greater operational efficiency.
“The overriding ambition is to build market leadership in SME financing while building a resilient institution.
