Shareholders of the Agricultural Development Bank (ABD) yesterday endorsed a move by the Bank to undertake a private placement of ordinary shares of the ADB with the Ghana Amalgamated Trust (GAT).

The approval for GH¢127 million was given at the Bank’s 32nd Annual General Meeting (AGM) held in Accra.

The Bank had, in its bid to quickly meet the GH¢400 million new stated capital, initiated plans to raise the said amount through private placement from the Ghana Stock Exchange (GSE).

“The immediate step is to start negotiations with GAT. So we have appointed transaction advisors (Serengeti Capital) and legal advisor and we are liaising with them so that we can come up with the best terms and conditions for ADB,” Board Chair of ADB, Mr Alex Bernasko said.

GAT was set up by the government as a Special Purpose Vehicle (SPV) to support solvent and well-run indigenous banks which were otherwise having difficulties meeting the new minimum capital requirement.

GAT was to issue GH?2 billion bond sale but was forced to abandon the plan after a court case challenging the legality of it soured investment appetite for the securities.

Consequently, the Finance Ministry has pumped GH?800 million into GAT.

Pre-emptive rights of shareholders waived

ADB also got approval to waive the pre-emptive rights of shareholders in relation to the ordinary shares to be issued to the GAT in relation to the private placement.

Still not meeting GH¢400m minimum capital

Although the GH¢127 million GAT support will shore up ADB’s stated capital, it still does not guarantee the Bank meeting the new regulatory stated capital for commercial banks.

Currently, the Bank’s paid up capital stands at GH¢552.1 million, much over the requirement, but reduces to GH¢258 million when a negative income surplus from previous loses of GH¢294.1 million is applied.

Hence, when it receives the GH¢127 million GAT support in addition to its GH¢258 million paid up capital balance, its new paid up capital will be GH¢385 million – some GH¢15 million shy of the GH¢400 million.

When asked about how ADB plans to make up for the shortfall, Mr Bernasko said: “We can from our own resources close that gap but, it is difficult to put time on these things, it is very difficult to say three months, six months, I can’t say it now.”

GH¢34m profits in 2018

ADB recorded a dip in its profits to GH¢34.06 million in 2018 from GH¢47.34 million achieved in 2017, representing a 28 per cent fall.

“2018 was particularly a year that had a lot of challenges for the Bank ranging from changes in the shareholding structure to effects of regulatory reforms. “We are convinced that the strategies put in place set the foundations for better performance going forward,” Mr Bernasko explained.

Shareholders’ funds in the Bank, however, grew to GH¢639.7 million in 2018 from GH¢479 million in 2017, representing a 33.5 per cent increase.

This, the Board Chairman of Bank, attributed mainly to injection of new funding.

“All other indices did not change significantly because of a deliberate policy to go slow and clean the Banks Balance Sheet of historical toxic assets,” he added.