FirstBanC expects gradual decline in interest rates
FirstBanc Financials Services is an investment bank, which was established six years ago in Ghana. Emmanuel Bruce of the GRAPHIC BUSINESS (GB) caught up with the Managing Director, Mr Samuel Asiedu (SA), and first asked how the bank fared last year in the midst of the harsh economic conditions?
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SA: In spite of the economic challenges, FirstBanc Financial Services has been able to ride the storm, and posted a very strong performance. The company witnessed over 60 per cent growth in total investments managed for its investors. The company’s client base also saw robust growth to over 10,000 clients.
First Fund, the company's flagship money market mutual fund, grew by 61 per cent to GH¢22.3 million, recording an annualised yield of 37.12 per cent, compared with 24 per cent average interest rate for the 91-day Treasury Bill. Interest on the First Fund by investors was strong due to its high returns, which led to a rise by 24 per cent in clientele base. The First Fund was adjudged the best money market fund for 2013; an award the fund has won for four consecutive years.
The company’s equity fund, the Heritage Fund, also saw a strong growth of 33 per cent to over GH¢1.3 million, and posted a return of 8.87 per cent, outperforming the Ghana Stock Exchange (GSE) Index of 7.12 per cent.
Inflows in pension schemes also went up, with pension funds under management increasing in excess of GH¢100 million. We anticipate further increments in 2015.
GB: What different thing is the company going to do this year?
SA: We have stepped up our client relationship and management to ensure that we sustain our current businesses and also diversified into other sectors for new business development whilst managing operational cost.
GB: How have customers responded to your services within the six years that you have been in operation?
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SA: We are six years and well received by the investing public. Our company is known and easily identified by people we speak to. The brand is well recognised.
GB: What is your assessment of competition in the banking industry?
SA: It is getting tougher as shown by the decline in the market share of the biggest banks. Technology is making it easier for the smaller banks to attract clients and pose as effective competitors. However, most of the banks do not have branches in the rural areas outside the regional capitals, and this still gives the large government-owned banks a certain advantage although they are in competition with rural banks.
GB: How is your company coping in the face of hard economic conditions?
SA: We are trying to market our products to a client base that our competitors are not targeting. We are targeting the average investor who wants to invest for the future.
GB: What does the company expect to see this year?
SA: We expect to see a gradual decline in short-term interest rates as the government continues its efforts to reduce the fiscal deficit.
Global cocoa prices are still high enough to provide the government with significant revenue, and the freed-up subsidies from lower oil prices creates more fiscal space for the government to boost infrastructure and meet statutory payments. An easing of the power crisis is expected as well, which will provide some respite for manufacturing and mining firms across the country, and improve tax revenues for the government. However, the depreciation of the Cedi is likely to continue, albeit at a slower rate, due to the high inflation and payment deficits
GB: Which critical sectors of the economy will the your company focus on?
SA: We will focus on attracting institutional investors, who will wish to invest in the Ghanaian economy.
GB: Some claim there are too many banks in the country. What is your take on that?
SA: Banking penetration is still low in Ghana, (eight per cent as at 2010, according to Proparco). One significant reason for this is that banking is heavily represented in the urban centres, but few banks have a presence in the rural areas and smaller towns. As a result, the opportunity for growth and expansion is still very high. The competition driven by the number of banks is good since it encourages them to find business elsewhere other than in the regional capitals. In the long run, this will help the nation achieve its vision as a cashless society and promote significant growth in the capital market.
GB: Will you want to see mergers and acquisitions within the industry?
SA: To an extent, yes, but not as a way of reducing the number of banks. It should be geared towards the creation of heavily capitalised banks that can expand further inward into the country to be able to finance and handle huge business transactions in the emerging oil and gas market in Ghana.
GB: Which critical areas of the economy should the government take note of?
SA: In the short to medium term, the energy sector is perhaps the most critical. The shortfall in power is bearing down heavily on industry in particular, which is in turn, having a heavy toll on the economy. This is likely to worsen the balance of payment deficit as well as depreciation in the Cedi.
Revenue collection should also be given more attention, since recurring fiscal deficits have been the bane of Ghana’s economic instability. Reducing the deficit will serve as a check on high interest rates and help fight inflation.