UT Bank Ghana Says Loan Growth Slows on Reserve Requirements

Loan growth at Ghana’s UT Bank Ltd. will be slower this year after the central bank increased the cash-reserve ratio and as treasury bill rates rose, according to Deputy Managing Director Pearl Esua-Mensah.

Lending will increase by 20 percent to 25 percent in 2014, she said in an interview yesterday. It expanded 35 percent last year to 917.1 million cedis ($334 million). The Bank of Ghana yesterday raised the primary reserve ratio to 11 percent from 9 percent, resulting in a 25 million-cedi increase in reserves each day that UT Bank must hold at the central bank, Esua-Mensah said.

Ghana’s economy, the biggest in West Africa after Nigeria, is at risk as the government struggles to contain its budget and current-account deficits. Fitch Ratings cut its outlook on Ghana’s debt last month to negative from stable, five months after downgrading the rating by one level to B.

“The new reserves requirement cuts down on our available funds to lend,” Esua-Mensah said. “Rising interest rates increase the risks associated with lending. Because of that, this year we will do less long-term lending.”

Elimination of fuel and utility subsidies and currency weakness helped push inflation to 14.5 percent in March, the fastest in more than a year.

The cedi is 30 percent weaker in the past 12 months, the most among 23 African currencies tracked by Bloomberg. It retreated 1.1 percent to 2.7750 per dollar by 3:23 p.m in Accra. The 91-day treasury bill rate rose to 24 percent on April 4, the highest since December 2009, according to data compiled by Bloomberg.

Attracting Deposits

The higher reserve ratio came into force yesterday after central bank Governor Kofi Wampah announced the plans on April 2.

“Until we can raise medium-term funds at cheaper rates, we don’t want to do too much medium-term or long-term lending,” Esua-Mensah said.

UT Bank plans to grow savings and current deposits by 40 percent to help ease the impact of the new reserve requirement, Esua-Mensah said. It will create a unit dedicated to attracting deposits and will introduce point-of-sale devices in markets and shops, she said.

The shares are unchanged this year on the Ghana Stock Exchange at 45 pesewas. They climbed 18 percent in 2013.

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