Standard Bank may re-capitalise Ghana subsidiary… makes $81m provision for Ghana bond losses

Africa’s biggest lender by assets, Standard Bank, is ready to re-capitalise its Ghanaian unit, Stanbic Bank, after making provisions to cover more than half of its holdings in the nation’s debt.

“It may become necessary for us to inject capital in that business and we will, at the ap­propriate time,” Chief Executive Officer, Sim Tshabalala, said in an interview on Thursday.

Banks in Ghana are staring at losses after the government restructured ¢83 billion ($6.8 billion) of local debts as part of a move to finalise a $3 billion bailout from the International Monetary Fund (IMF).

Standard Bank on Thurs­day joined FirstRand Ltd. in accounting for the impairment. Ghana has an estimated ¢576 billion of public debts.

Standard Bank said it had set aside 1.5 billion rands ($81 million) to cover potential losses arising from Ghana’s loan-re­structuring programme.

The bank said its total hold­ings of both domestic and on­shore dollar-denominated bonds are about 2.6 billion rands.

“We believe that the pain that we have taken in Ghana is exquisite,” Tshabalala said.

“They’ve been very tough in the negotiation process, as you can expect, because they have a public policy role to play,” the CEO said.

The government has “extract­ed what they consider to be the appropriate bargain, which while appropriate from a policymaker and a government point of view, it’s been painful for holders of that debt”.

FirstRand said last week it im­paired 496 million rands to cover potential losses. Nedbank Group Ltd., which has an indirect expo­sure to Ghana through its 20% holding in Ecobank Transnation­al Inc., estimated its exposure to the country’s sovereign debt at 175 million rands.

Despite the challenges, Standard Bank said it remained committed to Ghana. It plans to leverage its “fortress bal­ance-sheet” to drive market share and growth opportunities when they arise.

“We’ve made a commitment to cooperate with policymakers to have the appropriate solutions, and we stand by our Ghanaian business, we stand by our Ghana­ian clients, and we take a long-term view, we will look through the volatility,” Tshabalala said.

Beyond Ghana, the lend­er remains concerned by the sovereign debt levels in African countries, such as Kenya, Malawi and Nigeria. The bank said it will be “calibrating” its risk appetite to accommodate any looming threats.

“In each case, debt-to-gross domestic product is too high, which illustrates that at some

 point the countries are going to struggle to meet their obliga­tions as they fall due, which will give rise to the need for them to restructure,” Tshabalala said.

Standard Bank’s headline earnings surged 37 per cent to a record 34.25 billion rands for the year ending in December 2022, beating forecasts.

Green loans stood at 54 billion rands and the book is ex­pected to grow to as much as 300 billion rands by 2026, Corporate & Investment Banking unit CEO, Kenny Fihla, said in a separate investor briefing.

Standard Bank declared a final dividend of 6.91 rands per share, a payout ratio of 60 per cent. —Bloomberg

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