uniBank shareholders owed GH¢3.7bn – KPMG report

A report by the uniBank’s Official Administrator, KPMG, has disclosed that shareholders of defunct uniBank advanced loans amounting to GHS3.7 billion to themselves, while, in total, the related parties of the bank and its shareholders owed GHS5.6 billion minus interest.

According to the report, the shareholders proposed to repay the amounts owed by “related entities” to restore the local bank to solvency.

As part of plans to repay the GHS3.7 billion loan advanced to them and the GHS5.6 billion owed by the related parties, the shareholders proposed the following:

– Injection of GH¢1 billion not later than mid-July 2018

– Injection of GH¢1 billion by end of September 2018

– Assignment of the holding company’s (HODA) assets amounting to GH¢4.1 billion to the Bank.

This means an amount of GHS6.1 billion in total, would have been injected into the bank had the plan been followed.

KPMG said in the report that: “The nature of the shareholders’ proposal in response to Official Administrator’s demand notice for payment of GH¢5.6 billion (excluding interests) owed by related parties” would have been in “cash, buildings and others”, even though it admitted that: “The deliverability, credibility and achievability of shareholders’ proposal has not been tested”.

How would the Shareholders’ loan repayment proposal have impacted capital and liquidity?

uniBank would have had capital deficit of GHS2.9 billion in the best case scenario, the report said, adding: “With the combined impact of all interim payment certificates being paid by Government, the capital deficit of the bank” would have improved “to GH¢2.2 billion in the best case scenario”.

It said liquidity of the bank would have improved in the short-term with the cash injection of GHS2 billion by September 2018, albeit medium-term liquidity challenges would have remained.

The report also said as of 31 May 2018, the liabilities of the bank exceeded assets by 284%, with capital deficit being GHS7.1 billion based on Return on Risk Weighted Assets (RWAs) which was -514%.

It said there was “significant deterioration in asset quality” of uniBank.

Dr. Kwabena Duffuor II

The report noted that “deficiencies in internal governance and bank-wide arrangements undermined the viability” of uniBank.

It said uniBank’s earning capacity continued to “deteriorate due to low returns on RWAs and a significant operating cost burden”.

As of the period under review, uniBank’s “cost-income ratio was -113%”.

The bank’s liquid assets, as of the time, according to KPMG, represent 2% of total liabilities.

Futhermore, the document also pointed out that the company was over-staffed compared to others in the banking sector, causing a drain on its financials.

According to the document, uniBank prior to the revocation of its license had 811 permanent staff, 64 contract staff , 990 outsourced staff and 79 National Service Staff for a bank with just 54 branches.

That was not all, the bank also had related entities whose staff depended on it for financial support.

In the breakdown, the permanent staff of the related entities were 1,284, contract staff of 244, outsourced staff 200 and 20 National Service personnel.

In total, the employees that depended on the financials of the bank were 3,692, even though the bank’s output was less, compared to the total staff strength.

It is anticipated that most of these employees have been affected by the revocation of the license of the bank, as they no longer work for the bank.