…. As profit drops 50%

From all indications, shareholders of Ghana Commercial Bank (GCB) will not tolerate any arm twisting tactics in the running of the bank by the majority shareholder (Government of Ghana), which they believe has been the bane of the bank up until now.

They will also not accept any below par performance which they believe is as a result of government’s interference, from the governing board and management team in future.

This indication was given at the just held 2009 Annual General Meeting (AGM) where share holders demanded an explanation to the 50% drop in 2009 net profit compared to that of 2008.

One of the ways shareholders would like the bank to be run is to see government’s long hands meddling in the bank’s affairs shortened.

“How different is this board from the previous government controlled board?”, a shareholder asked at the meeting, drawing laud applause from the other shareholders, who were not in their usual numbers this time round.

This, they believe would forestall the recurrence of the current situation in which government bullied the bank into writing Letters of Credit (LCs) to Tema Oil Refinery to the tune of GH¢ 598 million as at December 2008.

This money accrued close to 100% in interest, bringing the total TOR debt to GCB to GH¢ 848 million.

Insiders say the operations of the bank were severely hampered by this state of affairs since the bank’s liquidity was affected.

Shares in GCB, one of the biggest companies on the Ghana Stock Exchange, plummeted 4.3 percent to GH¢ 0.92 as soon as news on the bank’s 2009 performance was released.

This state of affairs has dully affected dividend paid to shareholders for the year under review which was 3.56 Pesewas per share, amounting to GH¢ 9.5 million, as compared to the 6 pesewas per share amounting to GH¢ 15.9 million paid out in 2008.

In his statement to shareholders, Chairman of the GCB board, Pryce Kojo Thompson said the bank recorded Profit after tax of GH¢ 18.8 million representing a drop in the 2008 figure of GH¢ 37.6 million.

The Net profit before tax was GH¢ 165.5 million which itself was 7% below that of 2008 with total operating expenses of GH¢ 140.7 million being 18 % higher than 2008.

“The reduction in profit after tax was due to the relatively higher provisions made against loans and advances to companies in the downstream sector of Ghana’s oil industry,” Mr. Thompson explained.

He said the abnormal increases in international prices of crude oil and refined products in 2009 presented serious challenges to the country’s downstream oil sector.

“Traditionally, your bank is the main financier to the country’s oil sector, especially TOR,” Mr. Thompson observed, and assured the shareholders that the board was confident in government’s redeeming its promise of paying the remainder of the TOR debt, after the GH¢ 445 million payment made last Wednesday.

Shareholders expressed delight at the apparent principled stance taken by the board vis-à-vis its relationship with the majority shareholder. Former Head of Banking Supervision at the Central Bank, Dela Selormey said the current scenario, inherited by this current management and government though, in which government cum SSNIT who have combined share strength of about 52% but have over 70 % representative on board and management, must be carefully looked at.

“This is not good for the image of a Public Listed Company,” the retired central banker cautioned, urging that the board to put arrangements in place to ensure good corporate governance at GCB, indisputably Ghana’s largest commercial bank. Mr. Kojo Thompson indicated when government announced the part-payment of the TOR debt that although GCB will continue to deal with TOR, this would be done on professional basis.