StanChart talks tough on recapitalisation

Standard Chartered Bank says it is in a comfortable position to meet Bank of Ghana’s new capital requirement, irrespective of the amount.

The readiness is based on the fact that the bank had anticipated a new round of recapitalisation and as such, prepared ahead of the central bank’s order.

This is reflected in StanChart’s strong reserves in retained earnings and income surplus, which the bank can easily fall on, or explore other available options to meet the directive.

Already, the bank’s Managing Director, Ms Mansah Nettey, said the StanChart was “well capitalised” and, therefore, “strong to go” with any form of recapitalisation.

“Our capital adequacy ratio is above 30 per cent and so, we are very well capitalised. In the event that BoG asks banks to increase their capital, we will do so. But there is no urgency on our part to increase our capital because we are well capitalised and liquid,” she said in an interaction with the media on June 6.

As of December, last year, the bank’s capital adequacy ratio (CAR) was 32 per cent, almost three times the BoG’s requirement of 13 per cent for all banks.

The CAR is the ratio of a bank’s weighted credit risk exposure expressed as percentage.

We have the resources

The bank’s Board Chairman, Dr Ishmael Yamson, added that a recapitalisation directive from the BoG will not come as a surprise to StanChart, given that “we have always had this under consideration.”

“We also already have the resources to do it. The only decision will be to ask the shareholders to bring in fresh money or can we find the money within our reserves? But it is something that we are working on regularly,” Dr Yamson.

“Whatever the case will be, I do not think StanChart will be at risk at all,” he added.

Although the central bank is yet to announce a figure for the recapitalisation, Dr Yamson said he expected the amount to be more than GH¢200 million to help match-up with the risk levels in banks and growth in the economy.

Options Available

Last year, the bank posted impressive results on its operations, after efficient cost cutting measures blended well with a vigorous loan recovery strategy to suppress expenditures and boost revenue.

This ensured that the bank’s operations were shielded from the brunt of non-performing loans (NPLs), which has been the bane of the banking industry’s financials in the year under review.

In its audited financials presented to shareholders at an annual general meeting in Accra, the bank’s impairment charge declined by 62 per cent to GH¢81 million in 2016. In 2015, StanChart’s impairment charge was reported at GH¢212 million.

As a result of the significant drops in impairment charges and expenses, the bank’s net profit jumped by 239.39 per cent to GH¢224.51 million compared to 2015, when profit was GH¢66.15 million.

The strong growth in profit boosted StanChart’s retained earnings and further made it possible for the bank to transfer GH¢60 million from retained earnings to stated capital.

The transfer was to help the bank to comply with new requirements on the Banks and Specialised Deposits Taking Institutions Act 2016 (Act 930), as well as iron out some capital inefficiencies in the system.

While further transfers from retained earnings into stated capital are possible, bank’s Chief Financial Officer, Mr Kweku Nimfa-Essuman, said that would be based on the amount that the BoG would require as stated capital.

“If it is within our power to convert more, we will do that but if it (the amount required by BoG) requires that we do a rights issue, we will do that,” he explained. – GB