Bayport Savings and Loans PLC has reported a substantial decline in its Capital Adequacy Ratio (CAR), dropping from 18.8% in September 2023 to 13.9% in September 2024.
This 4.9-point decline, highlighted in the company’s unaudited financial statements for the period ending September 30, 2024, signals a reduction in Bayport’s financial cushion, potentially limiting its capacity to absorb unexpected losses and maintain stability in a fluctuating economic environment.
Despite the decline in CAR, Bayport recorded significant growth in total assets over the nine months, with assets rising to GH₵ 1.23 billion from GH₵ 1.00 billion the previous year—an increase of 23%. This expansion was primarily driven by a marked increase in loans and advances to customers, which surged from GH₵ 757.9 million to GH₵ 959.8 million.
This aggressive lending growth underlines Bayport’s commitment to supporting its customers and expanding its lending portfolio, positioning the company as a key player in the financial sector.
In addition to its asset growth, Bayport maintained full compliance with regulatory liquidity requirements, showing no defaults in statutory liquidity obligations. This consistent adherence reflects positively on Bayport’s ability to manage cash flow and meet short-term financial obligations, even as it faces internal financial pressures.
However, while regulatory compliance is a positive sign, Bayport’s overall liquidity position has weakened. Cash and cash equivalents decreased significantly, from GH₵ 68.0 million in September 2023 to GH₵ 47.0 million in September 2024. This reduction in cash reserves, despite asset growth, suggests mounting liquidity constraints that could restrict Bayport’s operational flexibility and ability to meet unexpected expenses or obligations.
The company’s income performance also showed a mixed picture. Bayport’s interest and similar income rose significantly, reaching GH₵ 305.7 million, up from GH₵ 224.6 million in September 2023. This increase in interest income reflects the expansion of Bayport’s lending portfolio, which contributed to a higher net interest income of GH₵ 127.8 million, up from GH₵ 92.4 million the previous year.
However, the cost of financing also grew, with interest and similar expenses rising sharply from GH₵ 132.2 million to GH₵ 177.9 million, reflecting the pressures of increased borrowing. These rising expenses, along with higher net fees and commission expenses of GH₵ 23.7 million (up from GH₵ 17.9 million), continue to place strain on profitability, even as the company expands.
Another area of concern is the increase in impairment losses on financial assets, which jumped from GH₵ 1.4 million to GH₵ 11.7 million in the past year. This sharp rise suggests a potential issue with loan recoverability, further emphasized by the slight increase in the Non-Performing Loan (NPL) ratio from 14.2% to 14.3%.
Although the increase in NPLs is marginal, a high NPL ratio underscores credit quality concerns, indicating that a significant portion of Bayport’s loans remain unpaid. Effective risk management and collection strategies will be crucial for Bayport to ensure that it can recover these loans and limit exposure to bad debts.
Nevertheless, Bayport managed to maintain profitability. The company reported a profit before tax of GH₵ 32.8 million, slightly higher than the GH₵ 32.1 million recorded the previous year. After accounting for income tax expenses, Bayport’s net profit reached GH₵ 22.5 million, reflecting resilience in maintaining profitability even amid financial and operational challenges.
The increase in total assets and adherence to regulatory liquidity standards highlight Bayport’s operational strengths.
However, the sharp drop in Capital Adequacy Ratio, reduced cash reserves, and increased impairment losses indicate areas of financial vulnerability.
Bayport may need to shift toward strengthening its capital base, managing rising expenses, and mitigating credit risks to ensure a balanced and sustainable growth trajectory.
