Every successful venture has an interesting story; one which involves one or more of the crucial qualities of hard work, tenacity, trust and a drive to succeed.
CAL Bank Limited is no exception. Beginning 25 years ago as an idea to be the first privately owned bank, it has grown in leaps and bounds to accomplish that and more.
Formerly called Continental Acceptances Limited, the bank was incorporated in March 1989, under the Companies Code, 1963 (Act 179), as a private limited liability company and commenced operations as a local merchant bank in 1990 with the sole aim of providing a truly differentiated world class banking solution.
“It all started in 1989 when Mr. Afari-Donkor and a group of others who had been toying with the idea of setting up the first privately owned bank in Ghana went ahead and invited the initial shareholders of the bank; International Finance Corporation (IFC), Commonwealth Development Corporation (CDC), The African Growth Fund, which was basically the first Africa-focused fund, managed by the Equator Bank and grandfathered by OPEC.
“To get the OPEC connection, we needed an American nexus so there was this minority owned African- American investment bank in the US called Pryor McClendon Counts & co and they were also invited to be shareholders.” Mr. Adu disclosed.
They observed, early in the day, that the dream to deal with securities and bills of exchange was “difficult to realize in a cash based economy with systemic weaknesses” and that, coupled with issues over the bank’s long name, led to the change of name to CAL Merchant Bank.
Another inhibiting challenge they had to deal with was the fact that, as an investment bank, they were allowed only one branch in selected cities.
“While we were in the Pegasus building, on the Independence Avenue, we couldn’t have a branch anywhere else in Accra. So we did Kumasi and Takoradi as well,” Adu disclosed.
After becoming the CEO in 2000, Mr. Adu decided he wasn’t going to be limited by that one branch rule so he determined to change the license. It took a while but then luck shone on them when the Bank of Ghana brought in the concept of universal banking.
“So we went for the universal banking license and from then on we started growing our branch network.”
The bank, which started with about six shareholders, did a public listing in 2004 that saw the number of shareholders skyrocketing to about 24,000 and its name being changed to CAL Bank
That certainly marked a turning point in the bank’s fortunes. “The transition from the unitary branch bank and the type of businesses that we were doing to what we have become now has been quite exciting. It still amazes me when I see the way the retail section is growing,” Adu says.
After its 2004 GHS 5.4 million initial public Offer (IPO) that was 4.5 times oversubscribed, CAL Bank undertook a successful rights issue, in 2009, to attain GHS 25 million in stated capital and, in 2012, it further increased its stated capital to GHS 100 million through a private placement, which was 2.5 times oversubscribed. But to Mr. Adu, what is most exciting is the dramatic technological shift.
“We started banking by doing our own analysis using a programme called Quatropo, which was succeeded by excel. Today, however, there are a number of banking applications that make the banking processes and analyses easy.
However, the more advanced technology gets it becomes a disadvantage to the analysts because by doing one’s own analysis, one gets to know the company’s balance sheet thoroughly. Now, one just keys in the balance sheet into an analytical programme which doesn’t require one to think much about the data.
“But the most exciting thing, for me, is the digital divide that we are now traversing; the fact that I can use my telephone to transfer payment and undertake other banking services,” Mr. Adu states elatedly
That, certainly, was a daunting challenge most banks had to deal with, coming from the telecommunication networks that were taking business away from the banks through their mobile money transfer services, but thanks to the development of apps, banks can now offer the service independent of the telcos.
A telling development in CAL Bank’s journey was the tremendous growth it recorded at a time perceived to be inimical to the development of indigenous banks.
Thereafter, in the early 2000s, there was an influx of Nigerian banks and everybody thought that the Ghanaian banks, because of the aggression and forcefulness of the Nigerian banks, were not going to do well
But this was not the case with CAL Bank.
“The interesting thing is that CAL Bank profited from the competition. When the Nigerian banks came, CAL Bank’s market share of assets, deposits and advances grew. And we actually came from 18 to number 10 in market size out of 28 banks.
“I do not see the influx of foreign banks as a challenge. What I see is the challenge for the country – and what Government must understand – is that, while it is convenient to allow what is loosely called Foreign Direct Investments into the country, when the country falls on hard times, they will exit. So whatever you do, you must develop a key local champion in every sector.
It would be wrong to expect that the financial sector will be supported in its entirety by foreigners. And this, I believe, is the mistake the government has made,” Adu argues.
He buttresses his argument with the experience of the Tema Oil Refinery (TOR)
“When TOR was in debt, all foreign banks received instructions from the top, to cut the credit lines. Only Ghana Commercial Bank, which was then fully Ghanaian owned, kept opening LCs (letters of credit) for TOR so that we, over the lack of fuel, will not demonstrate.
So why don’t you want to grow your local champions. Have competition, have as many foreign banks as you want. But there is nothing wrong with indigenization and nothing wrong with growing local champions. In Nigeria, there is not one single bank which is foreign, or has one foreign partner, with its CEO being a foreigner. They say it’s their policy.
Their governor says, “When I sit down to talk about the economy, I don’t want to talk about the economy with foreigners, I want to talk about the economy with indigenes.”
In the Ghanaian case, Mr. Adu cautions about the instances of where banks go into negotiations with the GRA on VAT, for instance, and it is led by foreigners which, to him, doesn’t augur well for the local banks since they could be lost in the process
He notes that Zenith Bank of Nigeria was given support by Nigeria’s Central Bank and the federal government to grow and become as big as it is today by giving them part of the management of the entire foreign reserves of the Nigerian government, which directed the big banks to go to Zenith Bank if they wanted to manage the country’s reserves.
“That is direct, positive intervention to make sure that the local bank becomes the big player. We don’t see that happening in Ghana in any industry.
He cited the example of the cocoa bond issue in which the government gave Deutche Bank the mandate to collect the US$1.5bn fees even though they charge 0.05%.
“Give it to ADB even if they don’t have the skill, and they will make the call to Deutche Bank so they develop the skill to play on the international market. It’s as if Ghanaians don’t want to help Ghanaians; there is nothing wrong with indigenization!” Adu reasons.
All the challenges notwithstanding, Mr. Adu is highly optimistic about CAL Bank’s future.
His reason; “I was made acting MD at age 37 and confirmed at 38. A group of people gave me that opportunity and in my 15 years as MD I have come to realize, with all apologies to people my age and older, you have to use the young people.
Every generation is smarter than the preceding generation because that generation grows in a more developed world. I came to that realization very quickly and I decided that I’m going to work with young people.
“I think the bank’s future is secure because it will be left in the hands of very capable young men and women, who hopefully, will continue thinking like me or even better, who will not have a sense of short term need or gratification or a feeling of entitlement.
“I believe that CAL Bank will continue to grow,” he states with an aura of certainty.
To Mr Frank Adu, there cannot be any compromise: the banking sector must do well.
“If the banking sector does not do well, our country will not do well. People vilify banks for making too much money. We don’t make too much money but banks have to be efficient.
“If you do not support and make your financial sector strong, you undermine your own economy because we can’t make loans for industry or consumer loans for the growing middle class.
“If you cannot support your middle class as a financial system, then businesses will die because they are the ones who spend money. It is their expenditure that drives industry. And it is the banks that facilitate that level of consumption and investments.”