It has emerged that a foreign company changed its mind about investing in Sovereign Bank after a look into the bank’s books revealed millions in losses after only 15 months of existence.
Financial Consultant, Michael Annan, said his investigation revealed that the bank had spent over ¢10 million on lawyers and IT professionals in its first 15 months of operation.
Speaking to Gifty Andoh Appiah on JOYNEWS’ Pulse show on Monday, he said, “the situation is so bad that you don’t have to look further but study the bank’s own first 15 months financial statement.”
He said it was worrying that a new bank of that nature could lose ¢8 million at such an early stage in its business operations in 2016.
Sovereign Bank was set up in October 2015 marking their first financial year in December 2016.
The Bank of Ghana (BoG) withdrew the license of the Sovereign Bank together with four others and merged the five banks into the Consolidated Bank Ghana Limited.
According to the Central Bank investigations “it emerged that Sovereign Bank’s licence was obtained by false pretenses through the use of suspicious and nonexistent capital,” the BoG Governor, Dr Ernest Addison stated.
Explaining why such a new establishment would incur such loses, Mr Annan said his investigations revealed that the bank’s other expenses were way too much.
“One of the biggest expenditure lines was legal and professional fees, which they paid up to ¢10.8 million for. That tells you where the money went to and how they acquired their license.
“I don’t think a bank that made ¢24 million interest income should spend the same over ¢24 million as other expenditures,” he noted.
According to him, another major expenditure line which contributed to the insolvency was their remuneration and IT which cost a whopping ¢6 million.
The financial consultant said it is not normal for newly established banks to make a loss in their first year as a lot of them avoid spending money they do not have.
“I think what we are suffering emanates from bad reporting from these banks in terms of what they report to the public and the auditors who okay it,” he added.