UT Bank: Banking

THE COMPANY: Formerly called UT Financial Services, UT Bank (UTB) commenced operations as a finance house in 1997. UTB evolved from a lending institution to a universal bank through the acquisition by its parent of BPI Bank in 2010 and its subsequent merger with the acquired entity. Listed on the Ghana Stock Exchange, UTB operates through a 26-branch network with over 600 employees.

UTB met the minimum capital requirement of GHS60m ($30.8m) set by the Bank of Ghana in July 2012 through a private placement that increased its stated capital to GHS85m ($43.7m). The private placement saw the German Investment and Development Corporation (DEG), International Finance Corporation (IFC), and the African Capitalisation Fund (ACF), managed by the IFC’s asset management company, taking substantial holdings in the bank. UT Holdings remains the largest shareholder of UTB with a 40.4% holding. Other significant shareholders include DEG with 13.5%, and ACF and IFC with 10.1% each.

UTB has recorded strong and steady growth since becoming a universal bank, with total assets increasing to GHS987m ($507m), representing a compound annual growth rate of 38% from 2010 to 2012. As of June 2013, UTB’s total assets had exceeded GHS1bn ($514m), spurred by growth in its operating assets. UTB’s GHS680m ($350m) in loans and advances at the end of 2012 represented a two-fold rise on the 2010 figure of GHS315m ($162m); this was largely supported by growth in customer deposits during the same period, which rose to GHS798m ($410m) in 2012 from GHS377m ($194m) in 2010. The bank’s non-performing loan ratio also declined significantly from 20% in 2010 to 12% in 2012 due to improved credit management. The net effect of these improvements was a rise in net profit from GHS9m ($4.6m) in 2010 to GHS20m ($10.3m) in 2012.

UTB shares rose 28.8% during 2012 to close at a year-high of GHS0.38 ($0.20). The shares have risen further to GHS0.50 ($0.26) over the first half of 2013, driven by a market re-rating based on the stock’s enhanced capital base and improved profitability.

DEVELOPMENT STRATEGY: New equity capital raised during 2012 will spur growth in both funded and non-funded income for the bank. The inclusion of IFC and DEG on UTB’s shareholder roster has cemented the bank’s strategic access to funding lines supporting international and cross-border trade activities. As of the end of June 2013, UTB had grown its trade lines to $161m (up from $89m at the end of the previous year), supported by its strategic shareholders. The bank is also well placed to finance larger transactions on account of its increased capital base.

UTB seeks to establish itself as a clear market leader in the small and medium-sized enterprises (SME) market. UTB sees Ghana’s large SME sector as a key driver of growth in the banking industry. As part of efforts to unlock the value in this sector, the bank has formed a partnership with IFC, through its Africa Micro-Small Medium Enterprises (AMSME) technical assistance programme, to improve service delivery to the sector. A new mobile access platform under development should assist in this effort.

In addition to growing its alternative distribution mechanisms, UTB plans to increase its branch network to attract cheaper retail deposits. The bank expects to add six new branches to its 26-branch network by the end of 2013. Mobilisation of cheaper retail deposits, as a result of branch expansion, is designed to further reduce the bank’s cost of capital.

The bank also plans to strengthen its position in the industry via continuous investment in IT infrastructure and human capital. UTB plans to deploy its remote teller platform and other electronic platforms, such as the Visa card network, during the second half of 2013. UTB is also seeking to establish a Corporate Academy to develop staff capabilities to raise the bank’s competitiveness in the industry. These initiatives are expected to boost operational efficiency overall and further improve UTB’s profit margins. UTB price & index relative performance UTB market ratios