CalBank Plc has launched a determined initiative to reclaim GH¢900 million in impaired loans by the end of 2024, an effort aimed at bolstering its financial position and maximizing shareholder value.
The bank has so far recovered GH¢712.5 million, with significant collections from the hospitality, construction, and services sectors.
This effort aligns with CalBank’s strategic goals of fortifying its balance sheet and preserving capital, especially critical after recent sector-wide financial challenges.
To achieve these recoveries, CalBank has employed a multi-pronged approach, including legal action and the sale of collateral assets.
In Q3 2024, the bank posted a net impairment gain of GH¢232.7 million on its financial instruments, a substantial increase from GH¢63 million in the same quarter of 2023. These gains reflect CalBank’s successful focus on extracting value from impaired loans.
Management explained that the gains resulted from recovering GH¢207 million from previously provisioned accounts, along with a GH¢25.7 million reversal in bond impairments following CalBank’s participation in the government’s Domestic Debt Exchange Programme (DDEP) rounds 1 and 2.
According to CalBank Managing Director Carl Asem, the recovery drive stems from a strategic need to offset previous impairments by aggressively reclaiming non-performing loans.
“When you experience losses and take those impairments, the next logical step is to be very aggressive in recovering the non-performing loans. These are shareholder funds which must be collected,” Mr. Asem shared in an exclusive interview with the Business and Financial Times (B&FT).
By adopting a strict approach on overdue accounts, CalBank is safeguarding its capital base and minimizing potential shareholder dilution—a point of priority in a challenging economic environment.
This effort has gained momentum in 2024, with cumulative recoveries reaching GH¢712.5 million by the end of Q3, up from GH¢505 million by mid-year.
This recovery focus has also driven a shift within CalBank, fostering stricter adherence to credit risk management policies.
“When customers take loans, they are expected to repay. These collections are the funds that are re-loaned to other productive sectors of the economy.” Mr. Asem added
Alongside recovery efforts, CalBank has adapted its lending strategy to reduce risk exposure by shifting its focus from corporate loans to a diversified portfolio that includes more loans to small and medium-sized enterprises (SMEs) and individuals.
This approach not only supports broader economic development but also mitigates the risk of relying heavily on large corporate loans, which can be vulnerable to economic fluctuations.
This lending shift also addresses CalBank’s non-performing loan (NPL) challenges, with the current NPL rate at 41 percent, partly due to a single major borrower accounting for over 20 percent of this total.
The bank expects its NPL ratio to drop below 20 percent as recovery efforts continue and stricter lending policies take effect.
Funds from recoveries are being redirected toward SME and individual lending, marking a shift in CalBank’s approach to lending.
This strategy allows the bank to serve a broader range of borrowers and contribute to economic growth by supporting small businesses and individual clients who may have limited access to credit.
CalBank’s strategic recovery and lending adjustments have positively impacted its financial performance. Loans and advances declined by 25.3 percent to GH¢2.5 billion at the close of Q3 2024, from GH¢3.4 billion a year earlier, largely due to recoveries and performing loan repayments.
Despite a smaller loan book, CalBank’s profit before tax surged by 26 percent, reaching GH¢343.5 million by Q3 2024.
Overall, CalBank’s focused efforts on recoveries, lending diversification, and credit management highlight its commitment to financial stability, protecting shareholder value, and supporting sustainable growth.