Consolidated Bank Has Some Tricky Ways For Investors

The country’s new state-owned lender is asking holders of more than 1.1-billion cedis in investments to accept lower rates and wait five years before accessing their cash, according to an industry body for fund managers and brokers.

Consolidated Bank Ghana, which was formed in August through a merger of five failed lenders, will issue institutional investors five-year bonds yielding 7.5% for fixed-term savings that were held with the liquidated companies.

This is according to Emmanuel Asiedu, president of the Ghana Securities Industry Association and managing director of the local unit of Stanlib Asset Management.

The same investors previously earned annualised rates of as much as 19% on savings with terms of three months to two years, said Asiedu.

Inherited debt
“I don’t expect fund mangers who were yielding over 15% to be happy,” he said.

Felix Dontoh, a CBG spokesperson, said the lender’s management was not readily available to respond to questions sent via text message.

CBG is issuing bonds in exchange for investors’ savings after being issued ¢450-million in fresh capital and a 15-year bond of ¢5.8-billion to compensate for the failed lenders’ liabilities at its formation.

The five banks were closed down after the regulator sharpened up its oversight of an industry that has been beset by poor governance and weak lending.

CBG took over ¢3.2-billion in fixed-term saving obligations from its predecessors, Asiedu said, citing figures that were discussed in meetings between the bank and the industry association.

Included in the amount are investments of ¢560 million held by fund managers and ¢500-million owed to non-banking institutions such as microfinance firms, he said.

The remaining portion is held by government agencies and individuals, and the latter will have immediate access to their funds when the agreed term ends, Asiedu said.

The industry association has accepted CBG’s proposal even though talks are continuing on whether investors will be able to trade the bonds to give some holders faster access to their cash, said Asiedu.

“You should take the shock,” he said. “If they bailed you out there has to be some sort of haircut, otherwise it also creates an immoral hazard.”

Support for the banking industry has cost Ghana almost 10-billion cedis over the past 18 months, Finance minister Ken Ofori-Atta said last week.