Managing Director of Republic Bank, Benjamin Dzoboku, has stated that his outfit is not anticipating any impact from the second round of the Domestic Debt Exchange Programme (DDEP) or the cocoa bills.
During the Annual General Meeting (AGM) for 2022, he clarified that the bank has no exposure to dollar-denominated instruments and holds only GH¢400 million, which accounts for 5 percent of the outstanding GH¢7.96 billion worth of cocoa bills.
As a result, the bank believes it will remain unaffected by these financial developments.
“We do not have any exposure in the dollar-denominated bonds, but we do have a small exposure in the cocoa bill and the exposure amounts to approximately GH¢400 million,” he said.
Despite facing challenges, Republic Bank is taking a proactive approach in managing its exposure to the government’s debt restructuring efforts. The bank has made provisions for this exposure, although it does not expect a significant impact on its profitability for the current year.
In the year under review, Republic Bank performed better than expected, even in the face of industry-wide headwinds. The bank reported broad revenue of GH¢478.7 million in 2022, a notable increase from GH¢374.5 million in the previous year.
Its total assets surpassed GH¢5 billion, growing by 20.2 percent compared to the GH¢4.2 billion recorded in the previous year. Similarly, liabilities increased by 25 percent to reach GH¢4.4 billion in 2022, largely driven by higher deposits.
However, despite these positive aspects, the bank reported a pre-tax loss of GH¢26 million, in contrast to a profit of GH¢125.6 million in the previous accounting year.
The bank’s year-end financials showed significant impairment losses, leading to negative returns on assets (ROA) and equity (ROE). The ROA stood at -0.49 percent, and the ROE at -3.18 percent.
Moreover, Republic Bank experienced an increase in its non-performing loan (NPL) ratio, rising from 15.32 percent in the previous year to 19.85 percent, primarily due to the expansion of the NPL portfolio. However, the Managing Director, Mr. Dzoboku, anticipates rectifying this situation by the end of the current year.
“When we look at the economic situation in 2022, we noticed that inflation went up quite a bit, reaching around 54 percent. On top of that, the exchange rate was all over the place, and we had some exposure to foreign currency risks. To play it safe, we decided to convert most of those foreign currency loans into cedis.
By implementing the debt restructuring measures, our non-performing loans increased to approximately 19 percent. However, we remain confident that by December, the non-performing loan ratio will witness a significant reduction. It is noteworthy that the bank’s regulatory forbearance-adjusted capital adequacy ratio stands above the required threshold at 21.25 percent.
Looking ahead, our Managing Director is optimistic about Republic Bank’s future. Barring any unforeseen external factors, the bank should be in a position to resume declaring dividends in 2025. This follows the expiration of the Bank of Ghana’s suspension of dividend payments and other distributions to shareholders, which was in response to the Domestic Debt Exchange Programme (DDEP).
“We will continue to monitor and assess the impact of the macroeconomic-related and other potential risks on our operations, whiles pursuing initiatives to ensure that our services remain relevant to all stakeholders in 2023. We will continue to form strategic partnerships with various institutions aimed at enhancing brand visibility and the diversification of our products and services,” the MD said, adding that the performance in the first half of the year gave added cause for optimism.