Ghana banks struggle despite recapitalisation progress

• Posted on June 26, 2024June 26, 2024
• by Nana Kwesi Coomson
• Comment

More banks may struggle to pay interim dividends to shareholders despite the permission granted by the Bank of Ghana following progress made in their recapitalisation efforts.

Citi Business News has gathered that only nine out of the 23 commercial banks in the country will be able to honour shareholders’ obligations albeit with strong capital positions after the moderation of the impact of the Domestic Debt Exchange Programme

During the recent Monetary Policy Committee (MPC) press conference, Dr. Ernest Addison, Governor of the Bank of Ghana, revealed that banks with stronger capital positions have been permitted to pay interim dividends.

This decision follows the directive issued to all 23 banks in the financial sector to suspend the declaration and payment of dividends and other distributions to shareholders due to the impact of the Domestic Debt Exchange Programme (DDEP), which eroded banks’ profits.

The banks collectively held more than 30% of the GH¢83 billion bonds involved in the swap for new instruments. The reduction in coupon rates and extension of payment terms under the DDEP have resulted in substantial losses for these lenders.

The new directive allowing dividend payments aims to compensate investors, especially foreign investors who have suffered losses due to currency depreciation, for their investments in the banking sector.

However, Citi Business News has learned from anonymous sources that most indigenous banks may struggle to comply with this directive.

Citi Business News has learned that foreign banks exerted pressure on the government and central bank to reach this decision during last year’s IMF and World Bank Group 2023 annual meetings in Marrakech, Morocco.

-Citi