Fidelity Bank’s shareholders approve funds to meet BoG’s minimum capitalisation

Board Chair, Mr. Edward Effah (middle) with other board members

Fidelity Bank Ghana Limited has held an Extraordinary General Meeting (EGM) of shareholders on November 30 where shareholders passed a resolution to increase the banks stated capital to meet the Bank of Ghana’s minimum capitalisation deadline.

After the general meeting, board members led by Chairman; Edward Effah interacted with the media explaining there had to be an emergency meeting to raise the minimum stated capital as directed by the central bank whereas the EGM could have come off in April or May of 2019.

Although 3 banks approached Fidelity for acquisition or merger talks, Mr. Effah declared they declined the offers because any merge had to be strategic and not just to meet a minimum capital requirement.

“When we acquired Procredit in 2014, the company had 24 branches as well as skills and systems which fitted our operations,” he said noting internal auditors have done their checks and presented the soundness of the bank’s position hence the application to the Bank of Ghana (BoG) for approval as a bank with enough capital to operate.

“We issued preference shares not diluted, deductible only to ordinary shares,” he stated.

Despite Fidelity shareholders passing a special resolution to meet the capitalisation requirements and the bank coming into more cash, Mr. Effah submitted the bank was in no hurry to enter new sectors.

“Fidelity didn’t scratch its head when the GHc400milion directive came because banks must be well capitalised to operate effectively, protect depositors’ funds as well as invest in the agriculture, real estate and transport sectors. We are also aware additional capital requirement directives will be given soon and unlike banks with little balance sheet who might struggle, we don’t have that problem,” he pointed out.

He said as a local bank, “Fidelity was founded by Ghanaians and run by Ghanaians although there are foreign investors who bring value and global networking opportunities, contact and relationships on board but their contribution is less than 40 percent.”

Ghana saw a turbulent period in its banking sector thanks to the power crisis branded ‘dumsor.’ Although the outages generated business for the Bulk Oil Distribution Companies (BDC) where oil importation boomed, because government owed the BDCs which had borrowed from the local banks, the level of Nonperforming Loan (NPL) ballooned. With the period also seeing high interest rates, high inflation coupled with the depreciation of the cedi against the dollar, the situation exacerbated.

As at December 31, industry NPLs had risen over 22% and when bank gave loans and couldn’t get them back, it meant their cash flow was little with liquidity dried-up.

The Bank of Ghana fearing a total collapse of the banking sector commissioned a look into the books of banks. That checking identified 9 distressed banks which were given guidelines to improve their standing.

Of the 9, 7 failed to balance their accounts which led GCB to take over Capital Bank and UT Bank.

A further 5 others were absorbed by a state creation, the Consolidated Bank, Ghana to safeguard the deposits of clients and to bring sanity to the system.

For Fidelity Bank however, Chairman Edward Effah submitted there weren’t any such monetary shortages as by the time the BoG made the GHc400m minimum capitalisation announcement, the bank already had GHc264 million, double that of the previous GHc120milliom minimum stated capital requirement.

In April, an emergency general meeting passed a resolution to move GHc20million surplus money to stated capital while fresh injections of capital from clients amounted to GHc70 million as at October 2018 bringing its stated capital to GHc354 million.

By the deadline of December 2018 for banks to have a minimum stated capital of GHc400 million, Fidelity Bank says it would have had GHc404 million thanks to the new resolution approving movement of GHc50 million to stated capital showing it was a resilient local bank clients can trust and for the regulators to hold up as a shining example.

While the collapsed banks were local banks, Fidelity stands out for being a local bank with strong liquidity position with its loans performing well, having risk assets on balance sheet and a rich capital adequacy ration.

The bank says it also fares well in Loan to Deposit Ratio against the top 10 banks in the country involving Zenith Bank, GCB, Stanchart, Ecobank, ADB, NIB, Stanbic Bank, Cal Bank, Barclays Bank and Unibank as at December 2017.

On quality of assets and earnings on investment, the bank says it invests in government securities and collects earning up-front and makes good returns on fees and commissions.

By: Michael Eli Dokosi/