A global perspective: Foreign companies are showing increased interest in the sector

As part of a broader trend of increased interest in the continent’s frontier markets – even amidst the potential of a tapering in the US Treasury’s bond-buying programme – Ghana’s profitable banking sector and rapidly expanding economy have attracted an increasing number of foreign investors eager to explore the prospects for growth in the country. However, the banking sector is hardly unexplored by overseas lenders, and pan-African companies and subsidiaries of European financial institutions have a long history of activity in the market.

OLD HAT: Perhaps unsurprisingly given its colonial heritage, British institutions are among the oldest players in the market. UK-based Standard Chartered is Ghana’s oldest bank. It opened its doors in 1896 when it was called the Bank of British West Africa. Barclays Bank, the sector’s other British lender, has had a presence in Ghana since 1917. But the country’s comparatively steady flows of commodity revenues over the past decade have resulted in the entry of other major lenders as well, such as Société Générale-Social Security Bank, which has just rebranded itself as Société Générale Ghana and has been in Ghana since 1975.

CROWDED MARKET: The trend of new foreign arrivals has dramatically picked up momentum since then, however. Over the past 20 years, these foreignowned banks, along with GCB (formerly known as Ghana Commercial Bank), National Investment Bank (NIB), Agricultural Development Bank and Merchant Bank, were joined by 19 new arrivals, including 11 that were majority-owned by foreign firms from Switzerland, India and a variety of African countries. Five Nigerian banks have been granted licences to operate in Ghana. The first to arrive in the market were United Bank for Africa, which has a majority Nigerian shareholding, and Guaranty Trust, which is 96% owned by its parent company, Guaranty Trust of Nigeria. Zenith Bank, which was licensed in 2005, and Access Bank, which opened its doors in Ghana in 2008, are both subsidiaries of parent banks in neighbouring Nigeria. Energy Bank, a subsidiary of Global Fleet Group, was the most recent Nigerian arrival, setting up shop in 2010.

A number of other pan-African lenders have also established a foothold in the country. Togo’s Ecobank became Ghana’s biggest bank in 2012 following its acquisition of The Trust Bank the same year and has been operating in the country since 1990. Stanbic, another of the country’s top six banks, is a subsidiary of the Standard Bank Group of South Africa and has been operating in Ghana since 1999. Libyan BSIC, meanwhile, was established in Ghana in 2008.

It is a wholly owned subsidiary of BSIC, which is based in Tripoli. Finally, the most recent African entrant was Mali-based Bank of Africa, which moved into Ghana in 2011 when it acquired Amalgamated Bank.

RECENT MOVES: The trend has continued throughout the past 12 months and certainly does not look to be stopping any time soon. Two Ghanaian banks have been targeted by foreign institutions in 2012-13, although one of these subsequently fell through.

FirstRand of South Africa withdrew its bid to take over Merchant Bank in July 2013 after offering $91m for a 75% stake in the bank in August 2012. As talks were under way, the Bank of Ghana (BoG) reported that it did not object to the proposal in principle, but that some “public interest” concerns would have to be resolved by the Social Security and National Insurance Trust (SSNIT), which holds a 68.75% stake in the bank. Ultimately, no agreement could be reached.

The Republic Bank of Trinidad and Tobago acquired an 8.9% stake in Home Finance Company (HFC) Bank Ghana in December 2012, and in June 2013 it announced it had bought a larger share in the institution, increasing its total shareholding to 32.02% and making it the bank’s largest shareholder. Republic Bank asked Ghana’s Securities Exchange Commission to waive a rule, under the Code on Mergers and Takeovers, which would have required it to make a full takeover offer once it had become HFC Bank’s largest shareholder. However, this request was denied in July 2013. Republic Bank has since declined to comment on the decision or its implications.

NEW ENTRIES: Although many bankers in Ghana are sceptical about the future prospects of any new foreign banks moving into the crowded market of 26 universal banks, there are reports that more entrants are to be expected. In May 2013 international press reports cited a suggestion by a Deutsche Bank company representative on the fringes of the World Economic Forum on Africa in Cape Town that a sales office in Ghana might complement the firm’s presence in Nigeria.

Local press reports have included suggestions that other British, French and US lenders – including US banking giants JP Morgan, which recently opened a representative office in December 2012, and Citibank, which already has a representative office in the country – are potentially exploring the establishment of a full branch.

FURTHER MERGERS: As in the universal banking sector, consolidation is a live theme in the RCB segment. In September ARB Apex called on rural banks to merge in order to boost capitalisation and reduce costs, warning that the Bank of Ghana (BoG) was likely to raise capital requirements again and that some banks could struggle as a result.

According to comments by the ARB, these changes may in the short-term prompt the country’s smaller rural lenders to turn to the local stock exchange to meet the new requirements, which could open up the potential for foreign participation. Indeed, as for the country’s bigger banks, this is something the central bank has encouraged as part of its broader push for recourse to equity markets. A number of lenders regard the decision to raise the requirements as motivated by a desire to push banks together so they can handle major projects.

DEVELOPMENT FUNDING: With the market for credit improving, the sector has become more lucrative for international players, which have sought shares in local financial institutions. In 2012 European Development Fund DEG-Deutsche, the JP Morgan-Chase Africa Capitalisation Fund and the International Finance Corporation, the World Bank’s private sector arm, acquired stakes of 13.52%, 10.14% and 10.14%, respectively, in UT Bank. UT Holdings retained the same number of shares, but saw its share of overall equity in the bank fall from 61.11% in December 2011 to 40.45% in 2012. UT said it was using DEGDeutsche funding to support its loans to the small and medium-sized enterprise segment.

Africa Development Partners, a Mauritius-based private equity development fund, and the French development fund Proparco both acquired stakes in CAL Bank in July 2012, of 28.9% and 6.86%, respectively. This enabled the bank to raise GHS75m ($38.6m) and gave it a total capital of GHS100m ($51.41m). The SSNIT also owns a 33.18% stake in the financial institution.

Seven of Ghana’s 26 banks are listed on the Ghana Stock Exchange, including CAL Bank, Ecobank Ghana, GCB, HFC Bank, Standard Chartered, Société Générale and UT Bank. Of those, four are locally owned, so opportunities for foreign investors to acquire stakes in indigenous institutions are somewhat limited. However, given the performance of the sector and the headline growth in the economy, it is likely to continue attracting interest from abroad, as foreign players look to tap into prospects the sector offers.

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The Report: Ghana 2013

Banking chapter from The Report: Ghana 2013

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