Home' Trinidad and Tobago Guardian : October 5th 2014 Contents OCTOBER 5 • 2014 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
STOCKS | SBG13
As at December 2013, Republic
Bank Ltd (RBL) owned 40
per cent of HFC Bank Ghana
Ltd. However, for much of
2014, RBL s attempts to
achieve full ownership have
been stalled by a series of manoeuvres and
counter-strategies by other affected and inter-
The market price of HFC s shares was
GH¢0.96 (96 Ghana pesewas) as at December
2013. On April 16, 2014, RBL made an offer of
GH¢1.30 per share for the remaining 60 per
cent of HFC with a deadline of September 1,
2014. This offer price was subsequently
increased to GH¢1.60; barring any new obsta-
cles, the new deadline to complete this purchase
are now expected to be in December 2014.
HFC s 100 per cent owned subsidiaries are:
HFC Investment Services Ltd; HFC Reality Ltd;
HFC Brokerage Services Ltd and HFC Capital
Partners Ltd. In addition, it holds a 60 per cent
stake in an asset management company UG-
HFC and a 51 per cent shareholding in Boafo
Microfinance Services Ltd.
To help us break-down and better appreciate
a new source of profit for RBL s 2014 results,
we will now take a look at HFC s results for
2013 followed by its half-year performance to
June 2014. We end by estimating HFC s 12
Strong increase in asset values
The group assets rose by 67.8 per cent to
GH¢999 million from GH¢595.2 million as at
December 2012. Driving this increase was the
opening of two new branches in Accra Metrop-
olis and the acquisition of three branches and
five agencies in the western region. The bank
now operates from 33 branches and has 37
Resulting from its acquisitions, the value of
goodwill moved from zero to GH¢3.93 million.
In addition, its prime interest generator, loans
and advances to customers, rose to GH¢515.7
million from GH¢330 million as at year-end
Cash and balances with the Bank of Ghana
moved from GH¢71.9 million to GH¢184 million.
In contrast, the amounts due from other banks
declined to GH¢55 million from GH¢60 million.
Also declining was pledged assets (repos); this
balance fell to GH¢6 million from GH¢6.5 mil-
lion as at the end of 2012.
The bank s holding of venture capital funds
jumped to GH¢9.7 million from GH¢1.8 million
previously. In addition, the value of government
securities increased to GH¢128.8 million from
GH¢67.7 million as at December 2012.
Liability and debt increases
Total liabilities moved from GH¢462 million
to GH¢826 million as at December 2013. The
rise in customers deposit balances closed at
GH¢453.6 million from GH¢312.4 million, rep-
resenting an improvement of only GH¢141 mil-
lion. This increase is significantly less than the
growth in loan balances of GH¢185.5 million.
Robust changes were reported under various
categories of debt. Amounts due to other banks
jumped to GH¢30 million from a zero base in
2012. Short-term borrowings, which were nil
in 2012, now showed a balance of GH¢108.1
million. These funds were received from spe-
cialised institutions while the bank awaited
instructions on their application.
Bond balances rose to GH¢67.4 million from
GH¢58.1 million as at year-end 2012. Although
no new bonds were issued, interest charged,
exchanges loss and inflation adjustments,
totalling GH¢12.6 million, were substantially
greater than redemptions and interest paid,
totalling GH¢3.0 million; this resulted in the
higher year-end balance.
Other liabilities closed 2013 at GH¢63.2 mil-
lion; this was GH¢42.1 million greater than the
2012 year-end balance of GH¢21.1 million. The
biggest contributor to this change was sums
due to creditors, which increased to GH¢63
million from GH¢20.9 million as at December
Shareholders equity rose from GH¢132.3
million to GH¢171.7 million as at December
2013. The statutory reserve fund more than
doubled to GH¢40.8 million from GH¢19.7
million as at year-end 2012. In addition, the
regulatory credit risk reserve improved to
GH¢10.3 million from GH¢6.3 million on
December 31, 2012.
Buoyed by robust current year s earnings,
the income surplus account improved by 251
per cent to reach GH¢19.9 million from GH¢5.67
million as at December 2012.
With 296,360,918 shares outstanding, the
book value of each share was GH¢0.58. This
suggests that RBL will record a substantial
goodwill figure when it completes the purchase
of HFC Bank. In 2012, the bank raised GH¢50
million via the issue of 112.42 million new
Operating results and dividends
For the 2013 year, HFC generated total rev-
enues of GH¢127.8 million; this represented an
improvement of 79.2 per cent over the GH¢71.9
million delivered for the comparative period in
This strong result was helped by robust eco-
nomic growth, which exceeded 7 per cent in
2013. Inflation, in low double digits, helps put
these results into better perspective.
Operating profit, which registered at GH¢50.1
million, was almost three times greater than
the GH¢17.8 million earned for the 2012 session.
After adding other income of GH¢1.9 million,
pre-tax profit came in at GH¢52 million, which
compares very favourably with GH¢18.8 million
earned in 2012.
After allocating funds to the national sta-
bilisation levy and taxes, after-tax income reg-
istered at GH¢39.8 million (2012: GH¢15.4 mil-
lion). After deducting GH¢453k for
non-controlling interests, the profit attributable
to equity holders came in at GH¢39.3 million
versus GH¢15.3 million for the 2012 period.
This result translated into diluted EPS of
13.02 pesewas (2012: 7.53 pesewas). The dividend
was increased by 25 per cent from the 2012
level of 2.8 pesewas to 3.5 pesewas.
Pre-tax profits are not disclosed on a seg-
mental basis. However, when measured by net
interest income, three out of four operating
segments generated higher revenues.
The sole exception was the mortgage division.
This result occurred despite mortgage loan bal-
ances increasing from GH¢91 million as at
December 2012 to GH¢115.4 million last year-
At both the microfinance and consumer divi-
sions, net fee income was lower in 2013. This
shortfall was more than compensated for by
the huge increases in net interest income.
Results for half-year to June 2014
In the first six months of 2014, assets grew
by 17.5 per cent, moving from GH¢999 million
last December to GH¢1.17 billion as at June
2014. Its largest component, loans and advances
to customers, stood at GH¢669.5 million; this
was 29.8 per cent greater than the year-end
figure of GH¢515.7 million.
Partly resulting from the dividend payment
of GH¢10.37 million, cash balances declined to
GH¢140.4 million from last December s
On the liability side, total balances increased
by 16.5 per cent to GH¢962.8 million from last
December s GH¢826.3 million. Customers
deposits rose by 7.4 per cent to GH¢487.2
million from GH¢453.6 million as at December
Short-term borrowings declined from
GH¢108.2 million last December to GH¢75.1
million as funds are gradually disbursed. Also
declining was deposits from other banks, which
moved from GH¢35 million last December down
to GH¢26.3 million.
Other liabilities rose sharply to GH¢155.9
million from GH¢63.2 million last year- end.
Also increasing were bonds balances, which
advanced to GH¢96.8 million from GH¢67.4
million last December. Partly accounting for
these increases were inflation adjustments and
Shareholders equity improved from last
December s GH¢171.7 million to GH¢209.7 mil-
lion. A major improvement was noted in the
capital surplus account, which rose to GH¢32.2
million from the year-end balance of GH¢4.6
All income components registered healthy
improvements helping HFC report total six-
months operating income of GH¢82.66 million
(2013: GH¢50.33 million). Profits after tax and
non-controlling interests came in at GH¢20.9
million while that attributable to shareholders
registered at GH¢21 million (2013: GH¢15.8
These changes saw EPS for the half-year
come in at 7.1 pesewas versus the 5.3 pesewas
earned for the comparative half-year in 2013.
HFC Profit Projections for October 2013 to
For the nine months ended September 2013,
HFC reported profits attributable to shareholders
of GH¢27.5 million. When we deduct this result
from the total profit for 2013 of GH¢39.3 million,
we derive a profit of GH¢11.8 million for the
quarter ending in December 2013.
To this figure we can add the six months
2014 profit of GH¢20.9 million to arrive at
GH¢32.7 million for the nine months to June
2014. Next, we will "guesstimate" HFC s profit
for the three months ended September 2014
at GH¢11 million. When we add this number
to the previous result, we derive a total profit
for twelve months of GH¢43.7 million.
Using 40 per cent as RBL s share, we get a
figure of GH¢17.48 million, which should be
included as RBL s portion of HFC s profit. This
converts into TT$32.16 million.
Let us see how close this number gets to the
final figure when RBL reports its results.
HFC Bank Ghana experiences
strong growth in 2013 & 2014
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