Managing Director of Zenith Bank, Henry Oroh
As commercial banks race to meet the Bank of Ghana’s December 31, 2018 minimum capital requirement deadline, Zenith Bank has become apparently the first bank in the country to officially meet the GH¢400 million benchmark.
According to the central bank, banks can either move funds from their income surplus or seek fresh capital injection or a combination of both sources to meet the new requirement which was raised from GH¢120 million.
Zenith Bank’s published 2017 audited financial results showed that the bank had an income surplus of more than GH¢459 million in addition to its stated capital which was slightly above GH¢122 million. However, the bank’s published unaudited 2018 first quarter results showed that it had moved funds from its income surplus – now boasting of a minimum requirement of GH¢400 million as at March 31.
This achievement by Zenith Bank makes it the first bank to have actually met the BoG requirement – demonstrating it in its unaudited 2018 first quarter financial results. This feat is consistent with a publication made by the B&FT last year which put Zenith Bank among three banks at the time in pole position to meet the stated capital requirement without external capital injection.
The bank’s success follows an incredible 2017 performance which had the bank recording a profit before tax of more than GH¢250 million – more than 23 percent over the outturn for 2016. The bank in the year under review further grew its total assets by more than GH¢1.27 billion to over GH¢4.67 billion.
Despite 2018 being only a quarter old, the bank has continued its strong performance with its total assets further shooting to GH¢5.85 billion. The move by the bank to shore up its minimum stated capital using funds from its income surplus did not decrease significantly the bank’s retained earnings kitty – boasting of more than GH¢221 million as at March 31, 2018.
The GH¢400 million minimum capital requirement is a 233 percent increase over the previous GH¢120 million benchmark which has been in place since 2012.
One of the key reasons ascribed by the central bank for increasing the stated capital in September last year was to create stronger banks that can drive the country’s economic growth by undertaking big ticket transactions.
The Governor of the Bank of Ghana, Dr. Ernest Addison in the aftermath of the increase explained that: “Having a financial sector or banks that can mobilise adequate resources and finance big-ticket transactions is crucial in being able to deliver that [economic] transformation, and this is why we are emphasizing the strength of the capital of the banks.”
Banks like Zenith Bank which has just met the new capital requirement are in a better position to partner government in its industrialization agenda particularly the one district -one factory initiative which seeks to put a factory in each of the country’s 216 districts.
Beyond supporting government’s agenda, an increased capital base means Zenith Bank can increase advances to the private sector – forging a stronger partnership in the process.