Access, Zenith, GTCO, 2 Others Provide N463.8bn as Impairment Charges in Response to Ghana’s Sovereign Bond Default

In response to the Government of Ghana’s sovereign bond default, five Tier-1 banks with subsidiaries in the West African country have made provision of about N463.8billion net impairment charges in 2022 financial year as against N236.05billion net impairment charges in 2021 financial year.

The Teir-1 banks are; Zenith Bank Plc, Access Holdings Plc, Guaranty Trust Holdings Plc (GTCO), United Bank for Africa Plc and Ecobank Transnational Incorporated (ETI).

THISDAY analysis of the banks’ 2022 financial reports showed that Access Holdings recorded N197.79 billion net impairment charge on financial assets in 2022 from N83.21billion in 2021, while Zenith Bank declared N123.25billion net impairment charge on financial assets and non-financial assets in 2022 as against N59.9billion reported in 2021.

In the same vein, ETI reported N84.56billion net impairment charge on financial assets in 2022 from N89.13billion in 2021 while GTCO posted N35.94billion net impairment charge on financial assets in 2022 from N760.8million announced in 2021.
In addition, UBA declared N22.3billion net impairment charge on financial assets in 2022 from N3.01billion in 2021.

Besides making provision, Access Holdings, GTCO, Zenith Bank and UBA reported N44.77billion loss in 2022 from their Ghana subsidiaries as against N65.38billion profit declared in 2021 financial year.
In 2022, the Government of Ghana announced the suspension of all Debt Service Payments on its External Debt, a move that was made to restore the country’s macro-economic stability, amid the country’s economic and financial challenges.

On 5th Dec 2022, the Government of Ghana launched a voluntary Domestic Debt Exchange Programme (DDEP), an invitation for the voluntary exchange of approximately $15.99 billion of existing Domestic Notes/Bonds held by various local investors, for a package of new bonds with extended payout dates and reduced coupon rates.

The DDEP was the first step of the Country’s Debt Restructuring Exercise, which was a pre-condition for a $3billion bail-out, that the government had sought from the International Monetary Fund (IMF), due to its unsustainable debt levels (with public debt at over 100 per cent of GDP, and debt service costs absorbing 70 per cent- 100 per cent of revenues).
In responding, Zenith Bank, on February 14, 2023, said it exchanged N123.6billion (GH 2,675,754,659) of its existing Government of Ghana bonds for a series of new bonds with maturity dates commencing from 2027 to 2038 under the Ghana Domestic Debt Exchange Programme.

“The new bonds were successfully settled on the February 21, 2023 and have been allotted on the Central Securities Depository. The effect of the exchange on impairment of the existing bonds at 31 December 2022 was duly recognised in the consolidated financial statements,” the bank explained in its 2022 financial.
Zenith Bank, which is Nigeria’s largest bank by profitability and market capitalisation, reported incurred loss of N21.02 billion from its Ghanaian operations in 2022 from N15.38billion reported in 2021.

According to Access Holdings, the group took an impairment of N103.10billion in recognition of the economic loss impact of Ghana sovereign debt crisis (Domestic debt and Eurobonds).
“Whilst the economic loss on Ghana Domestic debt has been determined via a Domestic Debt Exchange Programme (DDE) with definite terms, unlike the DDE, the Ghanaian government has not yet presented restructuring terms for the Eurobonds.

“Though, restructuring parameters are subject to a lot of uncertainty, the possibility of further material impairment charge for this event is considered remote. The carrying amount for Ghana sovereign debts in the books of the Group amounts to N348.15billion,” the banks explained in its 2022 audited results.

Access Holding declared N32.49billion loss in its Ghana subsidiary in 2022 from N22. 2 profit reported in 2021 financial year.
UBA, Nigeria’s largest bank by branch network across Africa also reported impairment losses from its investments in Ghana. The bank said it has lost about N17.2 billion from the restructuring of the Ghanaian bonds. UBA Ghana specifically incurred about N14.2 billion of the losses.

In its 2022 financial statement, the pan-African bank said its exposure to the Ghana debt market was through the investment activities of UBA Ghana, UBA UK and the New York Branch.
While UBA Ghana currently maintains investments in the Ghana Domestic and Eurobond market, UBA UK and the New York branch of the bank were primarily in the Ghana Eurobond segment.

“Included in the N17.979 billion impairment, charge on investment securities was N17.280 billion impairment loss attributable to Group’s exposure in the Ghana investment market, which significantly lost its value due to the Domestic Debt Exchange Programme (DDEP) launched by the Government of Ghana on December 5, 2022.

“DDEP was launched in response to the Government of Ghana’s defaulting in servicing its debts when it suspended payments on most of its external debts and to ensure debt sustainability aimed at securing $3b IMF economic support, ”UBA said in a statement.
UBA’s Ghana subsidiary closed 2022 with N2.58billion profit, a decline of 55.5 per cent from N5.81billion reported in 2021.

ETI also reported losses from its investment in Ghana’s sovereign bonds. According to the Pan-African bank, it incurred losses of up to $162 million (N69.2 billion using its stated exchange rate).

“Net impairment charges on loans were $15 million compared with $40 million in 2021. The comparatively lower impairment charge for 2022 reflected a decrease in gross impairment charges due to a decline in nonperforming loans. Impairment charges on other financial assets were $167 million compared with $0.2 million in 2021. Of these $167 million, $162 million were the impairment losses Ecobank Ghana incurred on its GoG domestic bonds and Eurobond,” it said.

According to data obtained from the banks’ 2022 financial statements, the total investment portfolio exposure by the GTCO, another top Nigerian bank, was about N167 billion.
It, however, incurred an impairment charge of about N35.6 billion on Ghanaian Bonds. The losses include exposure to Treasury Bills, Local bonds and Eurobonds issued by Ghana.
The Group reported N6.16billion profit in 2022 from its Ghana subsidiary as against N21.99billion profit declared in 2021.