Government competing with banks for deposits - Societe Generale MD
Banks are in serious competition with the government for low-cost funds from the general public as a result of the current treasury bill rates.
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This, according to the Managing Director of Societe Generale (SG) Ghana Limited, Mr Gilbert Hie, has the tendency of driving the cost of credit further up.
Treasury bill rates are currently above 22 per cent and Mr Hie said the high returns on them meant that many people would be lured into spending their otherwise idle cash on the coupons rather than depositing it with the banks.
Mr Hie said this in an interview after the bank took its turn at the Ghana Stock Exchange’s Facts behind the Figures programme in Accra on Tuesday.
“When that happens, of course, the government benefits, but the banks don’t get the deposits which we need to lend to the private sector,” he explained.
The programme is an initiative of the exchange for listed companies to explain into detail their annual financials to the media, stock brokers and other industry stakeholders.
Touching on current economic activities and their impact on the banking sector, the SG Ghana MD said, “I can tell you that banks are competing highly with the government for funds.”
Mr Hie said, “That has an impact on the entire banking sector, specifically on the interest rates of banks and cost of funds to businesses,”.
He also mentioned the steady rise in inflation as another challenge that should be checked since that also impacted the determination of interest rates and cost of funds.
That, he said, would happen if the Bank of Ghana (BoG) tried to prevent the rate from rising further by increasing its policy rate, the rate at which commercial banks lent funds from it.
Meanwhile, the bank’s balance sheet grew by 29.5 per cent in 2012 following a strong growth in deposits and loans in the period under review.
Its net profit was GH¢30.27 million, representing an increment of 32.3 per cent over the 12-month period.
Going forward, Mr Hie said, SG Ghana would open three additional branches, invest more in technology to increase profitability and productivity, among other things.
By Maxwell Adombila Akalaare/Daily Graphic/Ghana