According to the central bank, the books of the bank were so bad that even the banks that expressed interest in acquiring the bank wanted the BoG to provide the funds to carry out the acquisition as well as cater for the existing liabilities.
Bank of Ghana says no bank wanted to acquire ‘toxic’ UT Bank prior to the revocation of its license
The Bank of Ghana (BoG) has disclosed that before it decided to revoke the license of UT Bank, it was unsuccessful in getting a local bank to take over the reins of the bank.
“So bad was the financial condition of UT Bank that when BoG engaged with other banks to explore whether they would be willing to acquire the bank and rehabilitate it, they showed an unwillingness to do so after they had conducted their own independent due diligence on the bank,” BoG said.
The Governor of the BoG, Dr Ernest Addison made the revelation while speaking at the Annual New Year School at the University of Ghana following the arrest of the UT Bank founder, Kofi Amoabeng and Beige Bank CEO, Mike Nyinaku.
He noted that the central bank run out of options other than to revoke UT Bank’s license and grant permission for GCB Bank to take over their good assets.
One of such potential bank acquirers after their due diligence exercise noted: “The poor quality of loans assets, potential tax liabilities, existing litigations and demands by third party lenders for settlement of their accounts makes the acquisition of UT bank as a going concern, a highly unattractive and risky proposition.”
Dr Addison said the conclusion was arrived at based on the following factors:
- UT bank had not filed corporate tax returns since 2015,
- Asset quality was extremely poor with NPLs of 44 percent,
- Loans that had been classified as performing had not been serviced for a year, indicating that the NPL ratio was underestimated,
- Collateral security for loans had not been perfected and in most of the cases, the security of loans had not been stamped or registered,
- The bank was in default of borrowing from several international lenders including the IFC, DEG,
- There was active litigation against the bank (valued at over GH¢170 million), and,
- The bank had excessive risk concentration to a few major depositors.
The governor recounted that the potential acquirer’s overall assessment was that the net asset value of UT Bank was negative and the only way it could consider an acquisition of the bank would be on condition that the BoG would provide this acquiring institution with the capital to buy UT, as well as provide liquidity support, and provide it with the financial support to acquire the necessary software to run the bank.
“What is more, the potential acquirer insisted that it would retain only 70 employees of UT bank if it acquired the bank assuming it received the financial support from BoG to do so. Obviously, the Management of Bank of Ghana did not accept these proposals as to do this would have meant that the BoG would have been paying private investors to take over the bank,” he concluded.
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