GCB Bank MD predicts strong growth in loans

BY: Maxwell Akalaare Adombila

The Managing Director of the GCB Bank Limited, Mr John Kofi Adomako, has expressed optimism that banks will soon reduce their appetite for treasury securities in favour of lending as rates on the risk-free government paper begins to fall.

He said banks were currently attracted to the securities due to the high rates offered, which, he said, presented an opportunity for the lenders to make attractive earnings with less to no risk.

“With regard to the investments that banks are making (in treasury securities), I think it is all a function of interest rates. Banks see opportunity in government paper, which is designed as risk-free and, therefore, as interest rates begin to come down, you will see that banks will have no option but to lend to the private sector,” he said.

The MD was speaking to the paper on July 22 in Accra on the composition of banks’ investments, moments after GCB Bank presented a GH¢14.15 million check to the Ministry of Finance as dividend for the 2020 financial year.

Banks’ investments

A Bank of Ghana (BoG) report on the banking sector released in March showed that banks were pushing more money into treasury securities compared to the amount of funds channelled into loans.

The Banking Sector Developments report for March 2021 showed that investments in government paper shot up by 45.9 per cent to GH¢67.9 billion in the first two months of the year, compared to gross loans and advances, which rose by 3.6 per cent in the same period.

It said growth in banks’ investment holdings outpaced other asset classes “due to the higher propensity of banks to invest more in less risky government instruments.”

It said that tendency had been elevated by the pandemic-induced elevated credit risks and slowdown in credit demand.

“Investments shot up by 45.9 per cent to GH¢67.9 billion, compared to the growth of 7.2 per cent in the prior year. Accordingly, the share of investments in total assets scaled up further from 36.3 per cent to 44.7 per cent over the review period,” it said.

On the other hand, the report said gross loans and advances continued to experience a subdued growth, rising by 3.6 per cent.

It said the growth rate was a sharp decline from the 26 per cent growth in the corresponding period last year.

 “This is attributable to weak credit demand, higher repayments and banks’ increasing appetite for less risky assets. Adjusting gross loans for provisions and interest in suspense, net loans and advances grew by 2.2 per cent to GH¢41.4 billion, down from 27.2 per cent over the same comparative periods.”

“New loans and advances for the first two months of 2021 of GH¢4.7 billion also reflected the sluggish credit market condition with a 24.6 per cent decline from the pre-pandemic level of GH¢6.2 billion for the first two months of 2020,” it added.

Market conditions

In response, the GCB MD said banks’ actions were driven by market conditions, one which was interest rate.

“It is true that they are putting some good money into government securities and that is all part of balance sheet management but banks are driven by market conditions. As the market suggests, you put some money in corporate and consumer loans and you also have to diversify the portfolio and that is why banks will put some money in government paper,” he said.

But as interest rates begin to trend downwards, Mr Adomako said banks would have less option but to upscale credit to businesses.


Meanwhile, the MD of GCB Bank said the bank was able to weather the COVID-19 storm in 2020 to post decent results.

He said the handsome profit made resulted in the declaration and subsequent payment of dividend in line with GCB Bank’s tradition.

“Last year was a very challenging year for most Ghanaian businesses as a result of the impact of the pandemic. Many businesses were stressed and stretched and the banking industry, as a whole, had to be supportive of businesses in Ghana. GCB Bank was one of the banks that led the way,” he said.

“Despite all these challenges, we managed to give some forbearance to customers; we managed to support them get through the difficult times of COVID-19.”

“Despite all of these challenges, I am happy to say GCB declared a very respectable profit and as a result of that, we are able to return some of the profit back to our shareholders,” Mr Adomako said.


The deputy Minister of Finance, Dr John Kumah, who received the check for the GH¢14.15 million dividend, commended GCB Bank for the consistency in paying dividend and advised other state-owned enterprises and joint ventures to emulate the gesture.

He said dividend for the 2020 financial year was 25 per cent higher than the GH¢11.32 million dividend that the bank presented to the government in 2019.

It also brought the total dividend paid by GCB Bank to the state since 2017 to GH¢69.63 million, Mr Kumah said.

The state owns 21.36 per cent in the bank.