FINANCIAL PERFORMANCE OF MERGED BANKS IN GHANA: A CASE STUDY OF CONSOLIDATED BANK GHANA LTD

Abstract

Banks' recapitalization is among the different reforms in banks for economies in emerging and developed countries. The banking sector recapitalization is a subject of discussion among government officials, business analysts, academia, bank regulators, and the public. Banks play a vital role in a country's financial development. Various countries have implemented financial sector transformation to build a stable financial framework. Introducing the Universal banking licence in Ghana in 2003, development in the banking industry has been experienced. However, opposing viewpoints can never be disregarded. Given a restricted limit with regards to managing, the financial area then, at that point, was more modest. Over the past sixteen years, three recapitalization programs have undergone the financial sector. After several recapitalizations, the Bank of Ghana (BoG) announced another minimum capital for all universal banks to attain GH¢400 million by December 31, 2018. Before the said deadline, sixteen (16) banks had utterly achieved the new base capital through new capital injection or capitalisation of excess surplus or a mix of both. The BoG approved three merger proposals after some banks failed to meet the minimum requirements Similarly, while cleaning up the financial sector in 2018, the BoG repealed the licenses of eight banks, namely, the Royal Bank, Beige Bank Limited, UniBank, Heritage Bank, Sovereign Bank, Premium Bank, Construction Bank, and GN Bank. The new bank, Consolidated Bank Ghana (CBG), founded by the Ghana Government, was given a full banking license to take over all deposits and a few selected resources of seven defunct banks. These were the Royal Bank, Beige Bank Limited, UniBank, Heritage Bank, Sovereign Bank, Premium Bank, and Construction Bank. The universal banking license of GN Bank was revoked for a savings and loans license. The above recapitalization and reforms reduced the overall total of the universal banks from 34 to 23. The problem statement for the research is to establish how financially merged basks in Ghana have performed using Financial Ratios emphasizing on Consolidated Bank Ghana. With this, the researcher aims to assess the impact of M&A on Consolidated Bank Ghana's financial performance from 2018 to 2021. A descriptive quantitative research approach was used for this project. vii In evaluating the impact of the financial performance of Consolidated Bank Ghana, the ratio analysis technique was used. A ratio analysis enables the Management to understand why their income, loans, deposits, profits, expenditures, and profitability performance have changed over time. Profitability, solvency, and Liquidity indicators were used in analyzing the performance with data sourced from company websites, Bank of Ghana publications and other literature. In conclusion, the Government of Ghana is commended for taking the right decision to incorporate a new bank, CBG, to take over the seven defunct banks. Their financial performance improved with solid liquidity and CAR ratio, among others, after the merger from 2019 to 2021, although 2018 was challenging. The Ghana banking industry has become more assertive with various measures and policies from BoG to streamline banking activities.