ADB posts huge loss in 2022 - DDEP, loans to blame

Agricultural Development Bank (ADB) PLC recorded a loss of GH¢371 million in 2022 as compared to the previous year’s profit of GH¢81.6 million.

This is a substantial deviation from the trend of modest profitability that the bank has recorded since 2017.

The loss was mainly a result of impairment on other financial assets, specifically the government’s Domestic Debt Exchange Programme (DDEP) which has seriously affected many an institution including the central bank, and loans.

This resulted in a decline in the bank’s Return on Equity and Return on Assets to 56.41 per cent and 5.01 per cent respectively.

Meanwhile, the size of the bank’s balance sheet grew in the year under review from GH¢6.5 billion in 2021 to GH¢7.4 billion, representing a 14.9 per cent growth.

The non-performing loan portfolio (NPL) of the bank saw a reduction from 31.21 per cent in 2021 to 29.74 per cent last year.

The Board Chairman of the bank, Daasebre Akuamoah Agyapong II, who announced this at the bank’s 36th annual general meeting in Accra, yesterday, said the bank’s participation in the DDEP resulted in direct and indirect additional impairment on bonds held by the bank, amounting to a total amount of GH¢375 million.

That, he said, negatively impacted the capital adequacy ratio (CAR) of the bank from 14.49 per cent in the previous year to 3.6 per cent last year.

He explained that the objective of the bank, however, was to significantly reduce the NPL ratio to attain the industry brackets by the end of 2024.

“Deposits grew by 19 per cent from GH¢4.9 billion in 2021 to GH¢6.9 billion in 2022.

At the end of 2022, the bank’s capital adequacy ratio (CAR) stood at 7.3 per cent, which was below the regulatory minimum balance of 10 per cent,” he said.
 

Strategic plan

Notwithstanding the economic challenges and their negative effects on the financial sector, he said the bank was putting in place adequate measures through a two-year strategic plan adopted at the beginning of 2023 to ensure the sustainability, growth and profitability of the bank.

“In this regard, the Board of Directors is working on a capital restoration plan that will return the CAR of the bank to the regulatory minimum as soon as possible.

Engagements with stakeholders will commence once the proposal has been reviewed and approved by the Board of Directors,” he said.

According to the Managing Director of the bank, Alhassan Yakubu-Tali, the 2022 financial performance was a reflection of the impact of what turned out to be a challenging year for the Ghanaian economy.

“In addition, like most other banks, we experienced elevated credit losses because some of our customers struggled to repay their loans.

As credit quality deteriorated, we added to loan loss reserves.

Our 2022 results reflect a net build of GH¢49 million to our loan loss reserves.

We ended the year with total loan loss reserves of GH¢512 million,” he said.
 

Outlook

Mr Yakubu-Tali said the bank was working to build a bank that offered its customers unmatched convenience, expertise, high-quality service and a variety of financial products and services

He expressed confidence that “our competitive advantage will remain our diverse customer base, which is rich in history through relationships built over the years.”