Expect more crisis – Operators of S&Ls cautioned

Sydney Casely Hayford

Owners and operators of Savings and Loans (S&Ls) companies should expect more closure of their businesses as Bank of Ghana (BoG) continues to clean the banking sector and take actions against insolvent companies, Financial Analyst, Sydney Casely Hayford has warned.

Following recent panic withdrawal that hit the bigger retail banking sector, Casely Hayford believes the Central Bank’s clampdown on some indigenous banks leading to their subsequent revocation of licenses and collapse will result in more S&Ls folding up.

Speaking to Goldstreet Business, the analyst opined the S&Ls sector must expect more crisis because the people behind its establishment have failed to meet adequacy ratios and have also not adhered to the banking sector rules.

“Nigeria has just collapsed 182 banks, most of them are savings and loans banks. You must expect same here too. A lot of these banks were established for family business purposes”.

“They are not doing good banking per say. They are set up so that the owners and family members can just go and take money from banks when they are in need” the Financial Analyst said.

He further explained that bad lending, non-performing loans portfolio and the cost of revenue ratios have been major factors contributing to liquidity challenge in the banking sector.

Juxtaposing the amount of revenue being raised by the banks to the total debt incurred, he noted it was a major challenge factor.

“If you look at this ratio, most of these savings and loans banks are close to the 90 per cent element where the cost of doing business is approximately 90 per cent of the revenue they are raising” he observed.

Panic withdrawal

In line with recent panic withdrawals as a result of drop in the level of consumer confidence, Casely Hayford noted he does not foresee the trend continuing for a loner period.

He stated that customers are just being cautious of their deposits and speculating which indigenous bank will be in line to fold up, emphasizing, “I don’t think there is so much panic withdrawal. Anybody who takes his money out of the banks will bring it back. Where is he going to put it? He does not have anywhere to put it. He will bring it back eventually”.

The advent of panic withdrawals has led to a fall of consumer confidence in the banking sector. Chairman of GN Bank, Dr. Papan Kwesi Nduom recently embarked on a tour aimed at installing consumer confidence and strengthening indigenous banks.

He interacted with customers to remain loyal to and support the growth of indigenous banks and further entreated the public to avoid panic withdrawals. He stressed this move may negatively affect the operations of local banks.

By Dundas Whigham