The management of Cal Bank has denied claims that it is engaging in a private placement of its shares in order to shore up its depleted capital.
The Ghanaian indigenous bank, just like the banking industry has experienced a major surge in Non-Performing Loans (NPLs) which has caused a very massive decline in its capital.
The case of Cal Bank was partly caused by a major loan the previous management granted which went bad. This particular loan takes about 50% of the total NPLs of Cal Bank which hovers around 41%. Given the situation, the new management is in distress need to revamp its capital to strengthen the financial and solvency position of the bank although it has seen significant performance in the third quarter of 2024.
Many reforms have been undertaken at the bank as part of the effort to shore up the bank’s capital. One method that was rumored was an attempt to increase the capital through private placement.
Private placement is a method of raising capital where (in this case) shares are sold directly to a selected group of investors rather than through a normal public offering on the open market. It is a common route for companies looking to raise funds quickly and avoid market volatility.
However, this practice could possibly lead to the dilution of ownership where existing shareholders may see a reduction in the percentage of ownership. Without the opportunity to participate in the private placement, they risk a decrease in their claim on the company’s assets and earnings. In addition, private placements mostly attract large institutional investors which can cause a change in the balance of power in the company.
But the Managing Director of Cal Bank, Carl Selasi Asem has debunked the said claims insisting that the existing shareholders have agreed to help the bank to raise the needed amount.
“At the moment we are not engaging in a private placement. Our existing shareholders, Arise and Co. have looked at it and have seen the performance and are willing to take up their rights. We believe strongly with that and a combination of our balance sheet optimization, we should be able to resolve this CAR,” the MD clarified at the bank’s Fact Behind the Figures event on Tuesday.
Commenting on another rumor that the Central Bank has given the bank an ultimatum till the end of this month to shore up their capital or face sanction, the MD also debunked the said claims noting that the regulator has approved their capital restoration plan.
“Bank of Ghana has not given any notice up to the end of the month for this particular CAR issue and they have seen the numbers and they have seen growth,” the bank’s chief indicated.
