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Stanchart to maintain cautious approach to growth

Stanchart to maintain cautious approach to growth

The Chairman of the Board of Directors of Standard Chartered Bank (SCB), Mr Ishmael Yamson, has said the bank will continue to maintain a cautious approach to growth in risks assets while it works on restoring stressed assets back into the regular portfolio within the shortest possible time.

Addressing the annual general meeting of the bank on the theme: ‘Driving Investment trade and the creation of wealth in Ghana,’ he said: “The bank performance outlook for 2015 remains positive.”

He expressed confidence in the ability of the board, management and staff to deliver what he described as “a high standard of discipline, execution and conduct in 2015 in order to successfully sail through these turbulent times.”

Economic conditions and business

Mr Yamson recalled the impact of the volatile economic conditions of 2014 which had brought about uncertainties and challenges for most businesses and households.

“The environment was specifically defined by a severe macroeconomic disequilibrium characterised by a litany of unsustainable conditions; high fiscal and current account deficits, high inflation, rapid depreciation of the Ghana cedi, high public debt to GDP ratio which was estimated to have crossed the 60 per cent threshold by some analysts, a crippling energy crisis and a slowing economic growth,” he said.

He also mentioned the rising energy and utility costs, a general rise in both the cost of doing business and the cost of living and a slowdown in business activities, adding that ‘under such challenging circumstances, businesses and households were inevitably affected.

Mr Yamson said the most direct impact of the tough operating environment experienced during the 2014 was observed in two areas of the business.

He mentioned the operating cost and Non-Performing Loans (NPLs), saying: “The bank’s operating cost rose by 53 per cent to GhC197.8 million; this impacted our cost-income ratio which rose to 38 per cent compared to 31 per cent in 2013.”

He said the NPL ratio increased from 15.54 per cent in 2013 to 27 per cent in 2014 due to downgrades made in line with the “Bank of Ghana’s prudential guidelines.”

Mr Yamson explained that the increase in the NPLs was attributable to the general lengthening of working capital cycles across many sectors as well as exposure to “some of our clients to payment delays from the government.”

MD explains issues

The Managing Director of the bank, Mr Kweku Bedu-Addo, also explained the cause of the bank’s high operating cost giving three reasons.

First, he said the higher utility and energy costs associated with the off-grid solutions which were a response to the power challenges the country continues to experience forced the operating cost of the business upwards.

He also noted that the upward adjustments to staff costs in response to the escalating cost of living in order to remain competitive on the market and also ensure talent retention also played a role.

“One-staff rationalisation costs as a result of the reorganisation of the bank, announced in 2014, that were also charged to the 2014 cost,” he said, was also a factor.

He said notwithstanding this, “It is worth noting that our cost-income ratio rose to 38 per cent compared to 31 per cent in 2013; an acceptable cost-income ratio is 50 per cent and any business operating below this is considered to be efficient.”

Shareholders dividend

With regard to why the bank proposed to pay a lower dividend for the year, he said the bank’s strong top line performance of 24 per cent growth in operating income which could have been translated into profit and earnings was undermined by rising cost and impairment charges.

From GhC1.15p per share as dividend declared for 2013, the bank proposed to pay only Ghp0.35 for 2014, representing a whopping 70 per cent drop.

The shareholders at the meeting did not take kindly to the massive drop and took turns to chastise the board and management of the bank for what they described as too meagre and unacceptable.

But in his response, Mr Bedu-Addo shared in the sentiments of the shareholders and explained that “the proposed dividend payment was also impacted by the Bank of Ghana’s directive for a three per cent capital buffer above the statutory minimum of 10 per cent. This meant that we retained an additional GhC63million from our 2014 profits to meet this requirement as well as position the bank for future growth.”

“We are confident of the bank’s resilience to respond to the current economic challenges and to rebound when more benign market conditions return following the strategies and initiatives we have taken,” he added. — GB

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