Following the controversies that have rocked the decision to use private pension funds as equity finance for five banks, government has moved to set up the board of the Ghana Amalgamated Trust Plc (GAT).
Members appointed to this board include Mr. Albert Essien and Mr. Eric Nana Otoo as Board Chairman and Managing Director (MD) respectively. The other Board members are Ms. Susan Ohene, Mr. Sampson Akligoh and Ms. Abenaa Kessewaa Brown.
However, it is instructive that no private pension fund has as yet been identified as having agreed to make an equity investment into the beneficiary banks through GAT.
With these board appointments, it appears that a formal process is yet to begin in order to raise the said funds to assist some of the local banks in meeting the new GHc400 million capital requirement.
The fact the GAT is just getting a board, suggests that the GHc2 billion equity investment announced by the Bank of Ghana (BoG) at the beginning of the year is yet to be made, and the denial last week from the private pension funds’ association, to the effect that its members have not made any such equity investment through GAT, implies that the five local banks are possibly still operating without the minimum capital required of them, giving critics an avenue to accuse the BoG of not fully implementing its own regulations.
This notwithstanding, the banking sector over the past decade has been a major target for pension funds, especially SSNIT, indicating that private pension funds could find the GAT initiative attractive when it eventually does take off. Instructively though, SSNIT itself, in recent years has significantly reduced its equity stakes in the banks it is a shareholder in.
Indeed, the banking sector despites its present situation, still provides better returns on equity than many of the alternatives for pension funds in terms of where they would want to invest. In 2017, (the latest year for which full year audited financial reports are available) the highest returns on equity were 40.08 percent delivered by UBA. In all 16 of the 29 banks which released their 2017 results on schedule (and therefore were part of Goldstreet Business’s 2018 Banking Survey) delivered returns on equity that exceeded the nearly 14 percent per annum currently offered by 91-day treasury bills.
However, some analysts believe that, it is likely that GAT would face some difficulties not from the concept of investing in banks but rather in terms of some of the individual banks that the private pension funds are being asked to invest in.
The most obvious is National Investment Bank which has still not released its 2017 financials, leaving little for pension fund investment managers to base their decisions on.
Some of the others may also be worrying for investment managers intent on competitive returns. For the 2017 financial year, Prudential Bank made a loss that left it delivering negative Returns on Equity (ROE) of -11.14 percent. Agricultural Development Bank made a positive ROE of 5.53 percent but this is less than half of the current yield on risk free 91 treasury bills. However Universal Merchant Bank made competitive ROE of 22.40 percent for 2017.
The fifth beneficiary is to be the result of a merger between Omni Bank and Sahel Sahara Bank which made ROEs of 14.31 percent and 6.10 percent respectively.
However, while these figures are less than inspiring, analysts point out that it is to soon to pass definitive judgement since the 2018 audited financials are expected within the next two months and it is expected that ADB in particular will announce significantly improved results as a result of improved management since late 2017.
By Joshua W. Amlanu & Toma Imirhe