CAL Bank: Banking

THE COMPANY: CAL Bank is one of the leading diversified financial institutions in Ghana, providing a range of banking and financial solutions to large corporations, small and medium-sized enterprises, public sector institutions and retail customers. In addition to its commercial banking, the company also owns three subsidiaries: a securities broker, a fund manager and investment advisor, and a custodian services provider. In 2012 CAL Bank’s subsidiaries accounted for 4.2% of the group’s GHS52m ($2.44m) net profit. During 2012, the bank successfully raised GHS75m ($35.2m) of Tier 1 capital via an over-subscribed private placement to meet the regulatory minimum capital requirement of GHS60m ($28.2m) and to gain additional funding to support its growth strategy. This transaction increased its stated capital from GHS25m ($11.7m) to GHS100m ($47m). CAL Bank’s top shareholders since this move include the Social Security and National Trust of Ghana (SSNIT, Ghana’s state-sponsored pension fund), African Development Partners I (a private equity fund managed by Development Partners International) and Proparco (the French development finance institution). CAL Bank recorded robust growth on the back of its stronger capital position. Total assets rose by 44% to levels above the GHS1bn ($470m) threshold in 2012, cementing its position amongst top 10 banks by asset size. In 2012 it became the fifth-largest lender, as its loan book grew by 82% to GHS747m ($351m). Its loan book at the end of 2012 remained well diversified, with significant exposure to the commerce sector. Total deposits increased by 20% to GHS706m ($331m) during the same period. The bank’s share price continues to ride high, building on strong operational performance and profitability, as it more than tripled its net earnings in 2012. This impressive performance was supported by a 103% rise in operating income in 2012, coupled with a significant improvement in its cost-to-income ratio from 51% to 34%. CAL bank’s share price opened 2012 at GHS0.28 ($0.14) and closed the year as one of the best-performing stocks with an appreciation of 36% over the year. CAL Bank’s stock has risen more than 200% over 2013, crossing the GHS1 ($0.51) mark in July 2013. This feat was supported by its continued impressive run: CAL Bank more than doubled its net profit in June 2013 to GHS42m ($21.6m).

DEVELOPMENT STRATEGY: Strong leverage from additional Tier 1 funding raised during 2012 has enabled CAL Bank to compete favourably within the banking industry. Penetration into key growth sectors of the economy, with enhanced lending capacity and focus on more efficient processes, strengthened CAL Bank’s position among the top-tier banks in terms of all key operating ratios. The bank is expected to sustain growth via leveraging its bigger balance sheet to exploit opportunities in key sectors of the economy, i ncluding telecoms, energy and mining.

CAL Bank also seeks to invest in organic expansion to increase its footprint within Ghana. This will enhance its brand visibility as well as strengthen its retail segment targeted at the growing middle class. Additionally, its enhanced retail presence will spur cheaper deposit growth to support expansion in its loan book. CAL Bank has one of the industry’s highest loan-todeposit ratios (118% as of June 2013). The bank maintains that a high loan-to-deposit ratio is a core part of its strategy aimed at maintaining its net interest margins and return on equity. CAL Bank launched its “Deposit and Win” promotion initiative in June 2013, in a bid to gain cheaper deposits, garnering 15,000 new retail accounts within four weeks.

An increased focus on asset-backed retail lending and corporate banking, as well as increased Treasury activities amidst the prevailing high interest rate environment, will serve to strengthen CAL Bank’s position in the banking industry. Going forward, the bank is expected to grow by improving its operations and service quality, through continued investment in IT infrastructure and business automation processes. CAL price & index relative performance CAL market ratios