The Royal Bank (TRB) was established in August 2012. The bank was established with $51m (GHS100m) by the late Dr Alhaji Iddrissu Adamu popularly known as Alhaji Global.
Alhaji entrusted the running of the bank to two of his closest friends, Dr KK Sarpong and Oko-Nikoi Dzani of NDK fame.
Dr Sarpong was elected as the Board Chairman and Oko-Nikoi Dzani was a Board member from inception. They appointed Mr Ekow Bentil as the Managing Director of the Bank.
The bank was run well in the initial year and dividends were paid.
In the 2nd and 3rd year of operations, the bank expanded exponentially where the loan book was grown by 322% and 135% respectfully. Unfortunately, the loan book underperformed and by the middle of 2015, the bank required more capital to be within the prudential ratios of the Central Bank.
The non-performance of the Loan book was largely related to outstanding payments from executed government contracts with Interim Payment Certificates (GHS150m) and the Finatrade Group scandal that rocked the banking industry (GHS70m)
The Central Bank did an Asset Quality Review (AQR) in 2015 and made some recommendations for the bank. This was carried out by the bank and resulted in impairment of capital.
Alhaji was asked to inject more capital by the Board of Directors in order to help the bank stay within the prudential ratios. He subsequently decided to sell some properties to help sustain the bank. In doing so, he asked NDK to give him GHS20m whiles he looked for a buyer. This was given to Global Haulage by NDK and was injected into the bank as subordinated debt. This transaction happened in 2016. Unfortunately, Alhaji passed on afterwards.
The loan book kept detoriating since payments from the government contracts and the Finatrade group were not forthcoming. In this regard, the Board asked the Shareholders to inject more capital. The Shareholders obliged by putting up more buildings for sale. In the interim, they approached NDK to further advance GHS30m to help sustain the bank whilst they waited for the sale of the buildings to repay NDK.
In 2016, the bank wrote to the Central Bank for liquidity support. GHS200m was granted. This sustained the bank for a while.
In 2017, due to the state in which the bank had been run, the shareholders decided to change the entire Board of the bank and also bring in a new Managing Director.
Oko Dzani was the only independent board member retained and he appointed a consultant to recruit new board members. The new Board Chairman was Professor Bill Puplampu.
In early 2017, there was an improvement in the bank’s liquidity and there were signs the bank was turning around. In this vain, the bank repaid GHS50m of the liquidity support to the Central Bank.
Collapse of 2 local banks
By August 2017, the bank had improved its deposits by GHS400m but with the collapse of UT Bank and Capital Bank, there was a run on the bank and the bank started losing deposits. The loss of deposits was so severe that the bank had to call on the shareholders to inject further capital.
More Capital Injection
By the later part of 2017, it became much clearer that to sustain the bank, the shareholders had to put in more capital. The Shareholders agreed to inject GHS50m. This was communicated to management who further wrote to the Central Bank about capitalising GHS50m in properties that the shareholders have put up for sale.
Management wrote 2 letters to the Central Bank about capitalising the buildings. There was no official response from the Central Bank. Management then went ahead to pay stamp duties in registering additional shares due to the increased capitalization. Again, this was communicated to the Central Bank.
After receiving the letter about the registration of the additional shares, the Central Bank finally responded by stating that the buildings cannot be used as capital. The bank then requested for additional time to enable them sell the buildings. The Central Bank asked the bank to quickly monetise the buildings used for capitalization.
Minimum Capital Requirement
In September 2017, the Central Bank announced an increase in the MCR to GHS400m. The Shareholders of The Royal Bank decided to look for equity partners or merge with another bank in order to meet the MCR.
Run on the Bank
In February this year, the Central Bank announced they had appointed an advisor at both UniBank and Sovereign Bank. This caused another wave of cash withdrawals from the bank and subsequently, the bank had to fall on the Central Bank for further support in the form of ‘Clearing’ support. The Central bank supported the bank with GHS120m in ‘Clearing’ support. So the total support from the Central Bank was GHS270m.
The bank appointed Serengeti Capital as transaction advisors. The bank also engaged PWC to conduct Due Diligence on itself so as to prepare the bank for Investors and/or a merger with another bank.
After PWCs due diligence on the bank, it emerged that the bank had to provide additional GHS291m in addition to GHS164m that had already been impaired by the auditors Deloitte. To make the bank attractive for investors, it was proposed by Serengeti Capital that rather than impair the book further, the bank should seek dispensation from the Central Bank to write off the additional impairment over a period of time whilst the bank recover the bad loans.
The bank submitted credible capitalization plans to the Central Bank. The plan included recapitalization of the bank by Oakwood Green Holdings led by Gabriel Edgar and Daniel Addo. They were backed by Emerging Capital Partners (ECP). ECP were prepared to put GHS400m into the bank provided the Central Bank were not going to withdraw the GHS300m (liquidity and clearing support) as soon as the injected the capital.
Oakwood Green introduced ECP to the Deputy Governors of the Central Bank to demonstrate how keen they were on TRB.
Omni Bank were also keen to merge with TRB so the plan was a merger with Omni Bank and ‘new’ money from Oakwood Green.
Asset Quality Review –BoG
In April this year, BoG undertook another asset quality review on the bank. There was no exit interview with management after their exercise and the report of their findings were never shared with anyone at the bank.
Collapse of TRB
According to the Central Bank, TRB was collapsed on 3 main issues:
- High Non-Performing Loans
- Mis-Reporting to the Central Bank
- Shareholder Transactions- GHS161m
The NPLs of TRB was high due to non-payment of Government related contracts and the unfortunate situation with the Finatrade Group. These 2 items alone accounted for half of the reported NPL’s. The Finatrade debt was across most banks in the industry.
TRB never mis-reported to the Central Bank. The issue of mis-reporting can only be attributed to the fact that the Central Bank may have deducted all the capital injection that the shareholders of TRB gave to the bank. If the capital was deducted, then TRBs ratios will be found to be in default. Nonetheless, these were legitimate capital injections that the bank sought approvals from the Central Bank but never got response from.
The amount that was stated by the Central Bank is NOT accurate. The Shareholders do not know how that figure was arrived at. All shareholder transactions with the bank were done at arm’s length. The amount in the audited accounts totalled GHS49m and that included related parties. All these transactions were approved by the Board of TRB.
All that TRB required was for the Central Bank /Ministry of Finance to give a GHS300m dispensation for TRB to carry out its capitalization plans. There was absolutely no need for the Central Bank to add TRB to the Consolidated Banks. If Government related loans (GHS150m) had been paid timely and there had not been a run of the bank fuelled by the continuous speculation that the local banks were not ‘strong’, TRB would have worked itself out of the situation they found themselves in.
It is worth noting that TRB recovered in excess of GHS100m from the bad loans last year and were on course to do the same this year.
With the loans going to the receiver, it is highly unlikely the receiver will recover even half of the amount stated as most debtors will deem the debt as government debt so will not be in a hurry to pay back and this will be to the detriment of The Royal Bank Shareholder.