The Royal Bank is one of the five banks merged to form Consolidated Bank Ghana Limited
Shareholders of the now-defunct The Royal Bank (TRB), have said the non-performance of the erstwhile bank’s loan book was largely related to outstanding payments from executed government contracts with Interim Payment Certificates (GHS150million) and the Finatrade Group scandal that rocked the banking industry (GHS70million).
The Royal Bank was recently fused together with four other struggling local banks: Sovereign Bank, uniBank, The Construction Bank and The Beige Bank, by the Bank of Ghana, to form the Consolidated Bank Ghana (CBG).
In a statement, the shareholders explained that: “All that TRB required was for the Central Bank /Ministry of Finance to give a GHS300m dispensation for TRB to carry out its capitalisation plans”, adding: “There was absolutely no need for the Central Bank to add TRB to the Consolidated Banks. If Government-related loans (GHS150m) had been paid timely and there had not been a run of the bank fuelled by the continuous speculation that the local banks were not ‘strong’, TRB would have worked itself out of the situation they found themselves in.
“It is worth noting that TRB recovered in excess of GHS100m from the bad loans last year and were on course to doing the same this year.
“With the loans going to the receiver, it is highly unlikely the receiver will recover even half of the amount stated as most debtors will deem the debt as government debt so will not be in a hurry to pay back and this will be to the detriment of The Royal Bank Shareholder”, the statement said.
Read the full statement below:
The Royal Bank (TRB) was established in August 2012. The bank was established with $51m (GHS100m) by the late Dr Alhaji Iddrissu Adamu popularly known as Alhaji Global.
Alhaji entrusted the running of the bank to two of his closest friends, Dr. K. K. Sarpong and Oko-Nikoi Dzani of NDK fame.
Dr. Sarpong was elected as the Board Chairman and Oko-Nikoi Dzani was a Board member from inception. They appointed Mr Ekow Bentil as the Managing Director of the Bank.
The bank was run well in the initial year and dividends were paid.
In the 2nd and 3rd year of operations, the bank expanded exponentially where the loan book was grown by 322% and 135% respectively. Unfortunately, the loan book underperformed and by the middle of 2015, the bank required more capital to be within the prudential ratios of the Central Bank.
The non-performance of the Loan book was largely related to outstanding payments from executed government contracts with Interim Payment Certificates (GHS150m) and the Finatrade Group scandal that rocked the banking industry (GHS70m)
The Central Bank did an Asset Quality Review (AQR) in 2015 and made some recommendations for the bank. This was carried out by the bank and resulted in impairment of capital.
Alhaji was asked to inject more capital by the Board of Directors in order to help the bank stay within the prudential ratios. He subsequently decided to sell some properties to help sustain the bank. In doing so, he asked NDK to give him GHS20m whiles he looked for a buyer. This was given to Global Haulage by NDK and was injected into the bank as subordinated debt. This transaction happened in 2016. Unfortunately, Alhaji passed on afterwards.
The loan book kept deteriorating since payments from the government contracts and the Finatrade group were not forthcoming. In this regard, the Board asked the shareholders to inject more capital. The shareholders obliged by putting up more buildings for sale. In the interim, they approached NDK to further advance GHS30m to help sustain the bank whilst they waited for the sale of the buildings to repay NDK.
In 2016, the bank wrote to the Central Bank for liquidity support. GHS200m was granted. This sustained the bank for a while.
In 2017, due to the state in which the bank had been run, the shareholders decided to change the entire Board of the bank and also bring in a new Managing Director.
Oko Dzani was the only board member retained and he appointed a consultant to recruit new board members. The new Board Chairman was Professor Bill Puplampu.
In early 2017, there was an improvement in the bank’s liquidity and there were signs the bank was turning around. In this vain, the bank repaid GHS50m of the liquidity support to the Central Bank.
The collapse of 2 local banks
By August 2017, the bank had improved its deposits by GHS400m but with the collapse of UT Bank and Capital Bank, there was a run on the bank and the bank started losing deposits. The loss of deposits was so severe that the bank had to call on the shareholders to inject further capital.