The Managing Director of CAL Bank, Frank
Adu Jnr, has explained that a cap on interest rates could spike up rates beyond
the recent levels of 15 to 25 percent.
“You cannot cap interest rates. From a political perspective, you can attempt but you will pay the price. If interest rates are high, it is not the doing of banks. Banks do not manage an economy. Interest rates reflect the economy that you have created. We can attempt that…as they did in Kenya and see what happens.
He is, therefore, predicting dark times for Ghana’s banking sector should government legislate a cap on interest rates.
President Addo Dankwa Akufo-Addo has raised concerns over the high-interest rates in the country warning it jeopardizes the cost of doing business in the country.
“We’ve seen it in this country before– credit ceilings, interest rate cups – we paid a price eventually there was a blow-out, interest rates went out to 42-46 percent. Good management of the economy will drive what interest rates will do. High-interest rates are not the doing of the banks in any circumstance,” he argued.
Frank Adu Jnr argued that despite the cleanup in the banking sector and the pegging of the policy rate to 16 percent, the banking sector still responds to inefficient regulatory and legal frameworks that sometimes impede retrieval of securities.
Cal Bank has resolved to focus on four main sectors for the 2020 financial year. These include investment in digital and women banking, green financing among others. Executive Director of Cal Bank – approved by the Bank of Ghana to be the MD on January 2020 – Philip Owuredo explained to Joy Business that “this strategy is expected to catapult the bank to be one of the strongest and most competitive in the banking sector."
Cal Bank’s Non-Performing Loans hit 10 percent for the 3rd quarter although this was below the average of 18 percent by the Central Bank.
Total liabilities and shareholder’s equity also grew from GHS5 million in Q3 of 2018 to GHS7.2 billion in Q3 of 2019.
With a shift from loan advances to government securities at 91 percent for the 3rd quarter of 2019, Cal Bank cited the Basel 2 and 3 and general risk adventure of loan portfolios as crucial reasons.
Net Interest Income grew by 31%, which was generated largely from investment securities and loans.
Fees and commission expenses increased by 883.3%, as a result of transaction fees on a significant increase in borrowings from development finance institutions.
Net Impairment Loss increased by 49.3% due to specific provisions made on some challenging accounts.
Net trading income also increased by 63.3% through increased trade volumes and growth in fixed income trading. Other income went up by 59.6% as a result of increased corporate finance transaction fees.