The National Investment Bank (NIB) has secured some GH¢800million capital injection from the government to boost its capital position, improve liquidity and position the bank on a path to profitability, a situation last experienced almost a decade ago.
Alongside this capital injection, the bank has introduced some reforms in terms of policy guidelines for the board, management and staff, in addition to structures for risk appetite, liquidity management implemented to move the bank onto a sustainable path of growth and profitability which has seen the morale of staff lifted significantly.
Samuel Sarpong, Managing Director of the bank, in an interview, noted that the capital, which came in the form of a 10-year bond is being worked on to be converted into equity to shore up the bank and allow it to compete without challenges in an ever-growing market.
“We had a capital injection of GH¢800million which has gone into strengthening the balance sheet and would have an impact in terms of the earning assets of the bank as well as greater flexibility in terms of liquidity. This is a good step in the right direction,” he told the B&FT, explaining that with a few minority shareholders, the capital must go through a process to enable the government to convert its bonds into equity.
NIB’s impact on the economy cannot be overstated but the last decade has not been a good one for the lender. Despite the welcome news of capital injection, the bank’s position is still perilous, though the new management and board are making efforts to redirect the bank to its better times.
Finance Minister, Ken Ofori-Atta, last year told lawmakers that the bank needs about GH¢2.2billion to become liquid, clean up its books and meet the Central Bank’s stated capital requirement of GH¢400million. This, according to the Finance Minister, is despite government entering a swap agreement with the bank that has seen the provision of GH¢500million in fresh liquidity in exchange for the bank’s shares in Nestle Ghana, the local unit of the largest food company in the world.
The bank was part of the five banks to be rescued by the Ghana Amalgamated Trust (GAT) but was sidelined due to the toxic nature of its books, and significant liquidity challenges. With GAT injecting some GH¢800million from government coffers into the four banks, NIB has been on the government’s mind and the injection of this GH¢800million, according to Mr. Sarpong, is more than welcome news.
“This has come to strengthen our balance sheet and help with our recapitalisation efforts. I would like to assure our customers and Ghanaians that NIB is on track and the new board and management have understood the issues and we are putting in place solutions to stabilise the bank, managing the balance sheet, cutting costs, enhances recoveries and putting in controls,” he said.
These moves, so far, have allowed the bank to meet the needs of customers without hustle and Ghanaians, he noted, should be proud to associate with the bank which is known for industrial development. He added that leadership has developed a strategic plan to move the bank into the state of specialised bank with a focus on industrial development.
The bank’s challenges were due to locked-up funds in collapsed lenders but Mr. Sarpong explained that NIB has started the recovery of these funds from banks, savings and loans and finance houses but waiting on the ones that are locked up with fund management companies under the regulation of the Securities and Exchange Commission (SEC). “So far we have recovered some GH¢300million,” he said.
The bank, he noted, before the arrival of the current management was poorly managed from a technical and corporate governance perspective. Working with the new board of directors, Mr. Sarpong said, they analysed what went wrong and have come to understand exactly what the situation is and the plan to turnaround the bank is on course.
“There was a bit of lapses in terms of management actions and decisions made, for example, we had a number of placements with Non-Bank Financial Institutions (NBFIs) without board approval. A bank would have controls such as limits in place with which management can work with and when such limits are breached, the board approval is needed.
Management of the balance sheet requires a bit of technical competence and what we see in terms of services through a branch network and other channels via the internet are outward aspects. You have to have controls on what people can do and what cannot do and there were weaknesses.
The balance sheet was not properly managed, for example, NIB was paying high-interest rates on deposits compared to its competitors and assets and liability management were missing. For a bank, you have to have diversification of loan book but that was not the case because we had over-concentration in one sector of the economy. These challenges, over time, led to losses and once you make losses, your capital is eroded and that is what happened in this instance.”