Merchant Bank Ghana cannot continue to operate beyond one month if its debtors do not rush to settle their obligations as soon as practicable, sources close to the bank told CITY & BUSINESS GUIDE.
Owing to the critical condition in which it finds itself, the bank’s operations could grind to a halt by end of June, this year.
The bank has lent about GH¢71.8 million, which could have been used for recapitalization.
The monies were loaned to a gang of three companies- Engineers and Planners, which owes GH¢39.5 million, Myroc Food Processing Limited, Tema, which took GH¢17.1 million and Western Steel & Forgings, Tema, which is indebted to the tune of GH¢15.2 million.
The three companies have unfortunately defaulted in the payment of their loans, overexposing Merchant Bank.
The highest amount Merchant Bank was permitted to lend to any particular company or group should have been GH¢15,750,689.00, representing 25 percent of its net worth.
According to sources, Merchant Bank’s inability and reluctance to take drastic measures initially to recoup the monies from Engineers & Planners, a company owned by a brother of the President, has been its bane to date.
As a result of that, the board and management of the bank could not muster the courage to recoup the monies from the other debtors, especially the major ones.
The Bank of Ghana (BoG), regulator of the banking industry in the country, was expected to endorse the takeover of Merchant Bank by FirstRand Bank of South Africa since the early part of this year.
But it is unclear what is keeping the Central Bank from doing so even though in a recent statement issued in Accra it indicated that it had no objection to the takeover.
In its statement, it said it would soon give its final approval to the takeover of Merchant Bank by FirstRand of South Africa.
However, it said some “public interest” concerns were being resolved by SSNIT, Merchant Bank and First Bank.
But analysts have dared the bank to come out with such concerns since Merchant Bank is largely owned by SSNIT, which represents Government using pension funds, as the largest shareholder.
The regulator believes the concerns would be addressed soon to pave way for the approval.
It also confirmed that it has received and reviewed an application for a 75 percent stake in Merchant by First Rand for GH¢176.4 million.
However, the announcement by the Bank of Ghana is in sharp contrast with recent media reports which suggested that President Mahama, at a forum in South Africa, personally intervened in the sale of Merchant Bank to First Rand Bank of South Africa.
The reports additionally noted that the
sale of the Merchant Bank to South Africa’s second biggest bank could delay or be halted.
That followed a comprehensive report submitted by the Governor of the Bank of Ghana to President Mahama about the intended sale and the state of the bank.
It noted that last year, former President Rawlings praised President Mahama for stopping the sale of Merchant Bank.
Dr. Frank Odoom, former Director General of SSNIT, is believed to have been relieved of his duties because SSNIT, which is the majority shareholder, approved the sale of its stake in Merchant to First Rand.
As at July 31, 2009, 23 percent or more of the bank’s total assets were non-performing and were overexposed to the tune of GH¢63,002,755.00 of its net worth.