CAL Bank Records Negative Shareholder Equity, NPL Up To 45% as CAR Dips To -8.5% in Q1 2024

Cal Bank has recorded negative shareholder equity value for the first quarter of 2024.

Shareholders’ equity is the amount that the owners of a company have invested in the business. This includes the money they have directly invested and the accumulation of income the company has earned and that has been reinvested since inception.

The Bank witnessed a significant dip in the value of its shareholders’ equity from GHS 545m in Q1 2023 to a loss of GHS 139m in Q1 2024.

The drying up of the entire value of the shareholders’ equity has prompted the bank to launch a renounceable rights issue worth GHS 600m to recapitalize the bank.

The rights issue is however being challenged by a minority shareholder in the court of law as the said minority shareholder has sought an Order of Injunction on the rights issue by the Bank.

Cal Bank within the review period recorded a net profit of GHS 45m, this is however a decline from the GHS 60.4m recorded same period in Q1 2023.

Based on the net profit recorded for Q1 2024, earnings per share amounts to GHS 0.28 compared to the earnings per share of GHS 0.38 in Q1 2023.

Asset value of the bank at end-Q1 2024 amounted to GHS 9.8bn, a shortfall of circa GHS 400m from the GHS 10.2bn posted in Q1 2023.

The decline in assets value can be attributed to the dip in the bank’s loans and advances to customers which stood at GHS 2.4bn at end-March 2024 from GHS 3.5bn at end-March 2023.

Value of the bank’s investment securities also witnessed a marginal decline from GHS 3.6bn to GHS 3.3bn within the review period.

There was however, a significant increase in the bank’s cash and cash equivalents which grew to GHS 2.2bn from GHS 1.6bn within the review period.

Liabilities of Cal Bank driven largely by deposits of customers (GHS 7.3bn) grew to GHS 9.9bn at end-Q1 2024 from GHS 9.6bn at end-Q1 2023.

The increase in deposits at the bank by customers signal the confidence of customers in the bank and further strengthens the bank’s ability to undertake credit creation.

Meanwhile, the loan asset quality of Cal Bank measured by its non-performing loans (NPL) within the review period deteriorated significantly.

The bank’s NPL rose from 11.2% in Q1 2023 to 45.6% in Q1 2024, way higher than the industry’s NPL average of 24%.

The surge in the bank’s NPL indicates a serious weakening of its loan recovery mechanisms or strategies.

Capital Adequacy Ratio (CAR) of the bank also declined significantly with Cal Bank recording a negative CAR of 8.5% at end-Q1 2024 from a positive CAR of 10.5% at end-Q1 2023.

This is below the BoG’s minimum regulatory CAR requirement of 13%.

The negative CAR implies that the Bank may not be able to make provisions to cover potential losses incurred due to bad loans.

The capital adequacy ratio (CAR) is a measurement of a bank’s available capital expressed as a percentage of a bank’s risk-weighted assets and liabilities.

Capital Adequacy Ratios mandate that a certain amount of the deposits be kept aside whenever a loan is being made. These deposits are kept aside as provisions to cover up the losses in case the loan goes bad.

source: norvanreports