UMB CEO highlights need to deepen gains of efficiency ahead of budget review

UMB CEO, Nana Dwemoh Benneh (Second from left) with some staff and an SME customer at Okaishie Market

Financial services providers, particularly banks, and other businesses must prioritize efficiency in their operations to navigate the current economic landscape, according to the Chief Executive Officer of the Universal Merchant Bank (UMB), Nana Dwemoh Benneh.

In a recent interview with the B&FT ahead of the 2023 mid-year budget review – which is expected to be presented on Thursday, July 27 – Mr. Benneh expressed his expectation that the upcoming budget review would align with the current International Monetary Fund (IMF) program, and provide more clarity to help Ghanaian enterprises deepen their initiatives towards greater efficiency.

Nana Dwemoh Benneh is a Ghanaian banker with significant leadership stints in other markets including South Africa, Uganda and Kenya. Nana is in his valedictory year at UMB, where he has led an aggressive focus on digitization and SMEs. UMB is one of the remaining indigenous banks in Ghana and has since 2021 sort to hark back to its heritage by cementing its leadership in Corporate Banking and using this to grow its retail and SME franchise.

In further remarks to buttress his point on efficiency, Nana noted that enterprises must sometimes “shrink to grow” by focusing on their key growth segments and embracing digital transformation to maintain a cheaper competitive edge and to respond to customer needs more quickly.

“Our cost models must be adjusted appropriately to ensure that we can manage to sustainably provide the solutions for our customers. For instance, here at UMB, we are certain that we can deliver greater penetration in the market without necessarily expanding our brick-and-mortar. We are certain that we can do this through digital channels and value might be added here if policy somehow supported this digitization process,” Mr. Benneh explained.

Reflecting on the present economic challenges, Benneh underlined the value of drawing lessons from past economic downturns and emphasized the need for unity, stating, “It’s a time that we really have to pull together. We have similar experiences from the past to guide us. Indeed the past bear several parallels to the present and we weathered that storm so I am confident we shall sail through.

I am proud to note that in the financial services sector, the Bank of Ghana, supported by the Ghana Association of Banks and the Chartered Institute of Bankers is leading the way to ensure a unified approach in dealing with these challenges.”

The broad economic challenges coupled with the domestic debt exchange programme (DDEP), resulted in the banking industry recording significant profit-before-tax (PBT) losses amounting to GH¢8 billion at the end of 2022, which sharply contrasted with the GH¢7.4 billion profit recorded in 2021, according to data from the Bank of Ghana.

Additionally, there was a significant decline in the Capital Adequacy Ratio (CAR), dropping from 21.3 percent in April 2022 to 14.8 percent in April 2023. Nevertheless, most banks continued to maintain CARs above the regulatory minimum of 10 percent by the end of December 2022.

This year-on-year decline was primarily attributed to an increase in risk-weighted assets as a result of fluctuations in the exchange rates as well as losses incurred on mark-to-market investments. However, temporary regulatory reliefs to banks similar to measures implemented at the onset of the pandemic mitigated a more significant decline.

The good news is that, by April 2023, most banks experienced a return to profitability, with higher operating income contributing to a significant 47 percent increase in profit-before-tax compared to the same period in the previous year, the most recent central bank figures showed. The industry’s net income or profit-after-tax also witnessed substantial growth, increasing by 45.8 percent to GH¢2.8 billion in April 2023.

Furthermore, during the first four months of 2023, the sector experienced positive growth in return-on-assets, rising from 4.7 percent to 5.5 percent. Similarly, the return on equity exhibited an upward trend, increasing from 22.3 percent to 36.3 percent.

Mr. Benneh stressed the need to approach the year-to-date numbers with a balanced perspective, urging caution while maintaining a sense of optimism. He attributed the notable improvement in the figures to the remarkable resilience demonstrated by Ghanaian businesses.

According to Mr. Benneh, the positive trajectory observed was not solely a result of the efforts made by banks or financial institutions. Instead, he highlighted the commendable tenacity exhibited by Ghanaian business owners, particularly those operating in the semi-formal sector. Despite facing challenging circumstances, these entrepreneurs were able to navigate through the difficulties and emerge stronger than before.

“As the curtain draws on my time here at UMB, my view of the resilience and importance of the Ghanaian business community has been reinforced. Ghanaian businesses are really the backbone of the economy. When you look at it, it is not just what the banks have done. It is a testament to our business people, many of whom operate in the semi-formal space who have innovated, and found new and better ways for us to go through the storm and come out stronger,” he noted.

“This is why we have pivoted our strategy to support Ghanaian SME’s, in addition to our traditional support to large corporates. We anticipate that the budget will follow a similar trajectory for when businesses thrive, we all thrive.”

Mr. Benneh also noted UMB Bank’s recognition of the importance of driving efficiency in customer interactions and revealed their focus on developing new products that streamline processes and reduce operational costs. The bank’s ongoing digitalization efforts are also aligned with this objective, enabling smoother and more efficient customer experiences, driving down costs whilst delivering better value.

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