Interest rate cuts bite Republic Bank Ghana, nine-month profit falls a quarter

Republic Bank Ghana PLC’s nine-month profit fell by almost a quarter as falling Ghanaian interest rates squeezed the income it earns on loans and government securities, even as its balance sheet expanded and asset quality improved.

Republic Bank Ghana is 66.5 per cent owned by Republic Financial Holdings Ltd of Trinidad and Tobago, which runs banks across 16 Caribbean and West African markets.

Group profit after tax dropped 24.2 per cent to GH¢153.4 million (US$13.7 million) in the nine months to September 30, from GH¢202.4 million a year earlier, according to unaudited statements filed with the Ghana Stock Exchange on October 27. Earnings per share slid to 17.14 Ghana pesewas from 22.68.

The reversal was sharper at the bank alone, excluding subsidiaries, where profit fell 32.8 per cent to GH¢118.8 million.

Interest income, the bulk of a Ghanaian bank’s earnings, fell 18.2 per cent to GH¢761.7 million as yields on lending and investments compressed. Net interest income declined 11.6 per cent to GH¢480.4 million.

Fee and commission income cushioned part of the blow, rising 26 per cent to GH¢148.1 million, but not enough to hold the line. Total operating income fell 5.7 per cent to GH¢707.4 million, while operating expenses rose 7.8 per cent to GH¢459.4 million. The cost-to-income ratio consequently widened to 64.9 per cent from 56.8 per cent, a deterioration of eight percentage points. Impairment charges on financial assets rose to GH¢24.0 million from GH¢15.0 million.

The balance sheet tells the opposite story. Total assets grew 19.1 per cent to GH¢11.71 billion, customer deposits 13.8 per cent to GH¢7.02 billion, and loans and advances 29 per cent to GH¢4.03 billion. Shareholders’ equity rose 15.6 per cent to GH¢1.45 billion after the bank paid a GH¢42.6-million dividend, its first in three years.

Asset quality improved markedly. Non-performing loans fell to 11.60 per cent of the book from 16.49 per cent, and the capital adequacy ratio strengthened to 17.83 per cent from 16.75 per cent, both comfortably clear of regulatory minimums.

business@gleanerjm.com