Standard Chartered Bank Ghana Limited has said although the Bank’s performance in 2015 was disappointing, its forethought in 2013 and 2014 ensured that it came out unscathed by the challenges it faced.
Mr Kweku Bedu-Addo, the Chief Executive Officer of the Bank, noted that the poor performance in relation to previous years’ performance had to be seen in the context of the challenging operating environment that had persisted in the country.
Speaking at an engagement session with the investor community, analysts and the media during its turn at the Ghana Stock Exchange ‘Facts Behind the Figures’, Mr. Bedu-Addo explained that economic challenges stemmed from slow GDP growth, macroeconomic volatility, unstable currency as well as the energy crisis.
“That is enough to destabilise even the best run business because of escalating cost of operating off-grid using generators.”
Mr. Bedu-Addo explained that the Bank’s decision in 2014 to put brakes on its loans and the decision in 2013 to retain some of its earnings to improve its capital had served them well in light of its 2015 capital adequacy of 15.37, despite the high impairment.
“We have come out of this well capitalised, liquid, and able to pay dividend, shows we are doing something right,” he stated.
The Bank in 2015, posted loan impairment provisions of GH¢213 million, up 333 per cent from 2014, with commerce, manufacturing and forestry sectors contributing the most.
Underlying operating income went up two per cent from GH¢522 million to GH¢531 million over the previous year, while operating profit declined by 67 per cent to GH¢91 million.
The high loan impairment provision, he explained, stemmed from the massive disruption of working capital cycles of its clients due to the macroeconomic and other challenges in the operating environment.
“A lot of companies had their working capital cycle dislocated. Companies pay back their loans from their working capital cycle, and so when you have this massive disruption across an economy affecting not just households but businesses, it is inevitable that their repayment capacity becomes stressed, thus requiring that the Bank makes provisions for loan impairments,” he said.
He added that, “This, however, does not mean the loans will be written off, but will be restructured and recovered since most of the companies are on new cycles.”
He said Standard Chartered Bank would continue to restrain its asset growth as it had done since 2014 till market conditions become more conducive to aggressive asset growth. It would, however, respond appropriately to changes as and when they happen.
Mr. Xorse Godzi, the Head of Corporate and Institutional Banking (International Corporate and Financial Institutions), said the Bank would review the business environment for its clients and ensure that the restructuring was done appropriately.
“It will not be a wholesale restructuring but we will look at each company individually and come up with a restructuring strategy that will stand the test of time.
“A successful implementation will have two-fold benefits: the loans will be removed from our Non-Performing Loans position and the suspended interest will come back to revenue,” he stated.