Home' Trinidad and Tobago Guardian : July 6th 2017 Contents JULY 6 • 2017 guardian.co.tt BUSINESS GUARDIAN
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Has HFC bank turned the corner?
HFC Bank (Ghana) Ltd (HFC)
is 57.2 per cent owned
by locally-based Repub-
lic Financial Holdings
Ltd (RFHL). In 2016, the
Ghanaian economy grew by
3.6 per cent. In that environment, four new
players entered its market, in which consumers
can now choose to deal with any of 33 com-
Let us now review HFC's results to December
Changes in financial
Total assets grew from GHS1.6 billion to
GHS1.89 billion or by 18.6 per cent.
Net loans and advances to customers ex-
panded by 3.2 per cent to GHS919.4 million
from GHS890.9million. Its largest gross ex-
posures were to the commerce and finance
sector of GHS270.2 million (2015: GHS364.5
million), mortgage loans of GHS229.9 million
(2015: GHS227.3 million) and electricity, water
and gas of GHS184.1 million (2015: GHS15.8
Property, plant and equipment rose to
GHS65.5 million from GHS60.4 million. Net
additions of GHS13.4 million were concen-
trated under capital work in progress of GHS6
million and computers GHS5.5 million. The
latter reflected the bank's upgrading of its ICT
Other assets rose marginally to GHS76.9
million from GHS75.3 million. This balance
represented prepayments of GHS17.5 million
and other receivables of GHS59.4 million.
Trading assets climbed to GHS90.9 million
from GHS82.3 million; the pledged portion,
entirely comprising of treasury bills, expanded
to GHS22.3 million from GHS10 million.
Other investments increased from GHS24.9
million to GHS28.4 million. This comprised
GHS23.1million in a Unit Trust investment
and GHS5.2 million in other short-term in-
Investment securities declined to
GHS26.2 million from GHS33.4 million. The
held-to-maturity portion advanced to GHS23.1
million from GHS12.1 million while the avail-
able-for-sale component declined to GHS3.1
million from GHS21.3 million.
In the former's case, the Cedi portion pays
interest averaging 28 per cent per annum while
the US dollar portion pays an average of 6 per
cent annual interest. In the latter's case, the
decline was mainly attributable to the reclassi-
fication of its GHS17.5 million in HFC Venture
Capital Fund as an investment in subsidiaries.
Cash and cash equivalents swelled to
GHS642.9 million from GHS413.5 million.
The largest component was shown as money
market placement, which climbed to GHS339.3
million from GHS102.6 million.
The increase of GHS353.6 million in custom-
ers' deposits accompanied by the less robust
growth in lending activity contributed hugely
to this change.
Total liabilities advanced by 24.6 per cent to
GHS1.75 billion from GHS1.41 billion. Depos-
its from customers expanded by 31 per cent to
GHS1.56 billion from GHS1.19 billion. Within
this category, funds from corporate customers
edged up to GHS318.2 million from GHS306.6
In contrast, retail customers increased their
deposits from GHS882.9 million to GHS1.24
billion or by 40.5 per cent; this reflects great-
er confidence in the bank. Term deposits rose
to GHS416.5 million from GHS262.6 million
while current deposits increased to GHS522.3
million from GHS376.5 million.
Finally, other deposits improved from
GHS243.8 million to GHS301.2 million. To-
tal borrowings expanded to GHS41.85 million
from GHS28.46 million. Both the current and
long-term portions increased; the former
rose to GHS17.3 million from GHS5.7 million
while the latter advanced to GHS24.6 million
from GHS22.8 million. The ten-month loan
from Ghana International Bank for GHS22.24
million (US$5.296 million) matured on May
Other liabilities fell to GHS149.9 million
from GHS160 million. The bond portion
declined to GHS53.9 million from GHS63.1
million; this reflected partial redemption of
HFC 2016 bonds. Both the inflation linked and
treasury linked bonds were little changed. The
other liabilities component, mostly creditors,
increased to GHS96 million from GHS91.9
Total equity declined to GHS147.6 million
from GHS195.3 million. Excluding non-con-
trolling interests, shareholders' equity fell to
GHS145.1 million from GHS193.1 million.
The income surplus balance widened to
negative GHS43.8 million from negative
The opening balance was reduced by the cur-
rent period's loss of GHS47.98 million, while
relatively small transfers from other reserve
accounts mitigated the decline.
Following a transfer of GHS3.9 million to
the income surplus account, the regulatory
credit-risk reserve fell to GHS2.4 million from
GHS6.3 million. That movement reflected a
beneficial difference between the IFRS impair-
ment rules and the Bank of Ghana's credit loss
provisioning rules, which resulted in the need
for a lower provisioning value.
Stated capital was stable at GHS96.2 mil-
lion for both periods. The weighted average
number of shares outstanding was steady at
297,420,918; consequently, the book value of
each share declined to GHS0.49 from Decem-
ber 2015's GHS0.65.
Income and profit
Total operating income fell by 3.8 per cent
to GHS201.6 million from GHS209.6 million.
The net interest income component declined
to GHS131.2 million from GHS143 million. The
interest income element rose to GHS287.6 mil-
lion from GHS256.6 million. Interest on loans
edged up to GHS202 million from GHS197 mil-
lion. In addition, interest on cash instruments
climbed to GHS43.1 million from GHS27.1 mil-
lion while interest on investments advanced
to GHS42.4 million from GHS32.5 million.
Interest expenses soared to GHS156.4 million
from GHS113.7 million. Here, the two largest
components were interest on customers de-
posits and interest on debt securities. Consist-
ent with its larger deposit balances, the former
rose to GHS127.7 million from GHS83 million.
Interest on debt fell to GHS14.8 million from
Net fee and commission income advanced
to GHS35 million from GHS28.5 million; this
item primarily reflected retail banking custom-
ers' fees. GHS19.4 million of this total related
solely to the bank.
Net trading income contracted to GHS11.5
million from GHS26.8 million; the bulk of this
comprised of foreign exchange gains. All oth-
er income climbed to GHS23.9 million from
GHS11.3 million. This increase was largely
driven by sundry and other income, which is
Total expenses rose to GHS265.4 million
from GHS241.8 million. Personnel costs, the
largest component, increased to GHS97.8 mil-
lion from GHS90.1 million.
Notably, the net impairment on financial
assets (loans) declined to GHS72.8 million
from GHS81.8 million.
Other expenses soared to GHS73.9 million
from GHS54 million; within this line item,
"other expenses" expanded to GHS67 million
from GHS46.8 million.
Both operating lease expenses and depre-
ciation charges increased; the former rose to
GHS8 million from GHS6.1 million while the
latter advanced to GHS13 million from GHS9.7
million. These changes are consistent with its
larger physical assets and branch refurbish-
These movements saw its pre-tax operating
loss jump to GHS63.8 million from GHS32.2
Fortunately, the tax expense position im-
proved from a payment of GHS3.8 million in
2015 to a writeback of GHS16.4 million, most
of which is deferred. In 2015, the tax effect of
non-deductible expenses helped lower the tax
rate to 11.64 per cent. In 2016, the effective tax
rate was negative 25.78 per cent.
The national stabilisation levy rose to
GHS393,000 from GHS353,000. This charge
is scheduled to end in 2017.
These changes resulted in a net loss of
GHS47.7 million compared with a loss of
GHS36.3 million for 2015. After allocations
to minority interests, the loss attributable to
shareholders registered at GHS47.98 million
(2015: GHS37.1 million loss). That result trans-
lated to negative EPS of GHS0.161 compared
with the previous year's negative GHS0.125.
The decline in net interest income was most
pronounced under the corporate sector, while
both mortgages and microfinance registered
gains. However, fees and commissions im-
proved strongly under both the corporate and
mortgage headings, but were slightly lower
under the consumer heading.
Trading and other income, which experi-
enced a seven per cent fall, is entirely located
under the corporate column. Both microfi-
nance and corporate sectors experienced loan
growth to the extent of 29 per cent and 5.4 per
cent, respectively. Unfortunately, no segment
profit numbers are disclosed.
Q1 2017 results
For the first quarter ended March 31, 2017,
HFC recorded a 10.7 per cent improvement in
revenues to GHS54.95 million from GHS49.6
million. This outturn was hugely helped by the
increase in net interest income to GHS37.2 mil-
lion from GHS30.3 million.
Meanwhile, total expenses increased by only
8.7 per cent to GHS41.6 million from GHS38.3
million; noticeability, loan impairment was
zero. This cost containment helped HFC record
a profit attributable to shareholders of GHS12
million, which reflected an improvement of
31.9 per cent from the comparative 2016 result
of GHS9.1 million.
Total assets were little changed at GHS1.9
billion from last December's GHS1.89 billion.
Share price and
On the Accra Stock Exchange, HFC's share
price closed at GHS0.90 (90 pesewas) on De-
cember 31, 2015. In 2016, the share spiked to
GHS1.20 on January 12, but then closed the year
at GHS0.75. This year, the share was quoted
as low as GHS0.48 on April 17, but recently
closed at GHS0.50.
No dividends were paid for fiscal 2016. The
recent close reflects a negative P/E multiple of
3.13 and price to book value of 1.02.
The Bank of Ghana has decided to increase
the minimum capital for banks to GHS120 mil-
lion. Very likely, this will result in HFC having
to make a rights issue to comply with the new
Conceivably, its parent company, RFHL, in
addition to maintaining its percentage own-
ership in HFC, might want to use that oppor-
tunity, to source additional capital to help it
expand (or consolidate) its presence in the
Assuming that HFC's current profit im-
provement is sustained throughout the year,
can RFHL's shareholders anticipate reaping
reasonable rewards from this venture in 2018
In the next article, we will turn the spotlight on
Republic Bank Guyana Ltd's 2016 results.
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