2017 ANNUAL REPORT 2017 Statements & Reports ARB APEX BANK LTD. 2017 Annual Report 1 TABLE OF CONTENTS GENERAL INFORMATION 2 REPORT OF THE DIRECTORS 3 NOTICE OF AGM 6 CHAIRMAN’S REPORT 7 MANAGING DIRECTOR’S REPORT 10 INDEPENDENT AUDITORS’ REPORT 14 FINANCIAL STATEMENTS 18 Financial highlights 19 Statement of profit or loss and other comprehensive income 20 Statement of financial position 21 Statement of changes in equity 22 Statement of cash flows 23 NOTES TO THE FINANCIAL STATEMENTS 25 PROXY FORM 67 ARB APEX BANK LTD. Statements & Reports 2017 Annual Report 2 GENERAL INFORMATION: Board of Directors Mr. James Kwame Otieku - Non-Executive Chairman Osagyefo Amanfu Edu VI - Non-Executive Vice Chairman Mr. Anthony K. Forkah - Non-Executive Member Alhaji Fuseini Seidu - Non-Executive Member Nana Bram Okae II - Non-Executive Member Mr. Ronald Acquah-Arhin - Non-Executive Member Dr. Nana Akowuah Boamah - Non-Executive Member Mr. Yaw Odame-Darkwa - Non-Executive Member Ms. Yvonne Quansah - Non-Executive Member Mr. Larry Kwesi Jiagge - Non-Executive Member Dr. Philip Amakye - Non-Executive Member Dr. Joseph France - Non-Executive Member Mr. Kojo Mattah - Managing Director REGISTERED OFFICE P.O. BOX GP 20321 Accra No. 5, 9th Road Gamel Abdul Nasser Avenue South Ridge, Accra SECRETARY Curtis William Brantuo ARB Apex Bank Ltd. AUDITORS Deloitte and Touché Chartered Accountants The Deloitte Place Plot No. 71, Off George Walker Bush Highway North Dzorwulu, P. O. Box GP 456, Accra, Ghana BANKERS Bank of Ghana, Accra Ghana International Bank PLC, London Statements & Reports ARB APEX BANK LTD. 2017 Annual Report 3 REPORT OF THE DIRECTORS TO THE MEMBERS OF ARB APEX BANK LIMITED The directors present their report together with responsible for safeguarding the assets of the Bank the audited financial statements of ARB Apex Bank and taking reasonable steps for the prevention and Limited for the year ended 31 December 2017. detection of accounting fraud. Statement of Directors’ Responsibility Nature of business The directors are responsible for the preparation The ARB Apex Bank Limited is a Public Limited of the financial statements for each financial Liability Company incorporated under the year, which gives a true and fair view of the state Companies Act 1963 (Act 179) and owned by of affairs of the Bank. In preparing the financial the Rural and Community Banks in Ghana. It has statements, the directors have selected suitable been licensed by the Bank of Ghana, through the accounting policies, applied them consistently, ARB Apex Bank Ltd Regulation 2006 (LI 1825), made judgments and estimates that are reasonable to provide support services to the Rural and and prudent and have followed International Community Banks (RCBs). Financial Reporting Standards and the provisions of the Companies Act, 1963 (Act 179) and the Results of operations Banks and Specialised Deposit-Taking Institutions Act 2016, (Act 930). The results of operations for the year ended 31 December 2017 are set out in the statement of The directors are responsible for ensuring that comprehensive income, statement of financial the Bank keeps proper accounting records that position, statement of changes in equity and disclose with reasonable accuracy at any time statement of cash flows together with notes to the the financial position, the financial performance financial statements. and cash flows of the Bank. The directors are also Activities Operational Results 2017 2016 GH¢ GH¢ Profit/(loss) before taxation 2,009,690 (13,639,646) Income tax credit 2,449,960 274,395 Profit/(loss) after tax for the year 4,459,650 (13,365,251) Other Comprehensive income (104,720) 49,056 4,354,930 (13,316,195) Signed on behalf of the Board by: Director Director Date: 26 March, 2018 Date: 26 March, 2018 ARB APEX BANK LTD. Statements & Reports 2017 Annual Report 4 BOARD OF DIRECTORS Osagyefo Amanfu Edu VI Mr. Anthony K. Forkah Alhaji Fuseini Seidu Vice Chairman Member Member Mr. James Kwame Otieku Board Chairman Nana Bram Okae II Mr. Ronald Acquah-Arhin Dr. Nana Akowuah Boamah Member Member Member Mr. Curtis William Brantuo Board Secretary Mr. Yaw Odame-Darkwa Ms. Yvonne Quansah Mr. Larry Kwesi Jiagge Member Member Member Dr. Philip Amakye Dr. Joseph France Mr. Kojo Mattah Member Member Member Statements & Reports ARB APEX BANK LTD. 2017 Annual Report 5 MANAGEMENT TEAM Mr. Kojo Mattah Managing Director Mr. Alex Kwasi Awuah Mr. Charles Pinkrah Mr. Richard Mettle Addo Mr. Kenneth Owusu-Twumasi Deputy Managing Director Head, ICT Head, Projects & Credits Head, Human Capital Mr. Curtis W. Brantuo Mr. Kwaku Acheampong Ababio Mr. Maxwell Donkor Mr. Collins Ofori-Adu Head, Legal & Compliance Head, Finance Head, Banking Operations Head, Internal Control ARB APEX BANK LTD. Statements & Reports 2017 Annual Report 6 NOTICE OF ANNUAL GENERAL MEETING OF THE ARB APEX BANK LIMITED NOTICE IS HEREBY GIVEN THAT the 16th Annual General Meeting of the ARB Apex Bank Limited will be held on Saturday, April 28, 2018 at 10:00 am at the Golden Tulip Hotel, Kumasi to transact the following business: 1. To receive the Chairman’s statement and the Managing Director’s report for the year ended 31st December, 2017. 2. To consider and adopt the Financial Statements of the Bank for the year ended 31st December, 2017 together with the reports of the Directors and Auditors thereon. 3. To ratify the decision of the Directors to source GHS100 million loan through a bond programme. 4. To ratify the appointment of Deloitte & Touche as the External Auditors of the Bank. 5. To authorize the Directors to fix the remuneration of the Auditors. 6. To fix the remuneration of Directors. NOTES: • In accordance with Regulation 24(2) of the Bank’s Regulations, each Rural and Community Bank (RCB) shall be represented by its Chairman or a member of the Board with a duly sealed proxy form. • A copy of the instrument appointing the proxy is herewith attached and for it to be valid for the purpose of the meeting, it should be completed and deposited at the Head Office of the ARB Apex Bank Limited No. 5, 9th Road, Gamel Abdul Nasser Avenue, South Ridge, Accra not later than 48 hours prior to the meeting. DATED THIS 28TH DAY OF MARCH, 2018 BY ORDER OF THE BOARD CURTIS W. BRANTUO COMPANY SECRETARY Statements & Reports ARB APEX BANK LTD. 2017 Annual Report 7 CHAIRMAN’S REPORT INTRODUCTION Distinguished Shareholders, Fellow Directors, Ladies and Gentlemen, good morning to you all. It is a great pleasure to welcome you to the 16th Annual General Meeting (AGM) of the ARB Apex Bank Limited and to present to you the performance of your Bank for the 2017 financial year. THE GLOBAL ECONOMY There was widespread global economic recovery in 2017 across many developed economies on the back of increased consumer confidence and stronger momentum in demand. In Sub-Saharan Africa, growth continued to pick up slowly as a result of a rebound in oil production in Nigeria and improvement in commodity prices. Cocoa and oil prices increased whilst price Mr. James Kwame Otieku of gold continued its downward trend towards the end of 2017. Board Chairman These favourable external conditions impacted positively on the domestic economy through the financing and trade channels. THE GHANAIAN ECONOMY A business and consumer survey conducted in December 2017 by the Bank of Ghana showed that confidence remained high throughout 2017. This pointed to positive sentiments on growth prospects and general improvements in the economy. Provisional Gross Domestic Product (GDP) estimates from the Ghana Statistical Service (GSS) indicated that the economy grew by 9.3 percent in the third quarter, up from 9.0 and 6.6 percent in the second and first quarters of 2017, respectively. Although there were seasonal demand pressures on the local currency in the last two months of 2017, the local currency remained relatively stable against the major trading currencies throughout the year. Cumulatively, the Ghana cedi depreciated against the US dollar by 4.9 percent year-on-year. Consumer price inflation broadly trended downwards in 2017, despite marginal surges in the course of the year. Inflation plummeted from 15.4 percent in December 2016 to 11.8 percent in December 2017. The drop in inflation was due mainly to declines in non-food components of the inflation basket and the relative stability of the exchange rate. Overall, Ghana’s economy put up a strong performance by recording an end of year growth of 8.5%. ARB APEX BANK LTD. Statements & Reports 2017 Annual Report 8 31, 2017 were as follows: THE BANKING INDUSTRY The balance sheet grew by 19.1%, from The recent Assets Quality Review (AQR) undertaken GH¢273.9 million in 2016 to GH¢326.3 by the Central Bank revealed that there was million in 2017. deterioration in the assets of some banks with high credit concentration in the energy sector. This Total Deposits grew from GH¢231.9 million resulted in additional provisions which impacted in 2016 to GH¢277.9 million in 2016, negatively on the capital adequacy of some banks. representing a growth of 19.8%. Despite the deterioration of asset quality, the banking sector as a whole continued to be liquid, Shareholders’ funds rose to GH¢29.1 million profitable and solvent. in 2017 as compared with GH¢24.8 million recorded in 2016, representing an increase The Bank of Ghana also revised the minimum of 17.3%. capital requirement of banks from GH¢120 million to GH¢400 million for both existing banks I wish to state that the Board and the Management and new entrants as part of the plan to develop are working hard to diversify the income streams and strengthen the banking sector for national of the Bank in order to increase profits and improve development. shareholder value. Our rural and community banks (RCBs) were not DIVIDEND spared as they were also required to raise their minimum capital from the GH¢500,000 to GH¢1.0 Distinguished Shareholders, your Bank is still million by close of 2017. As I speak, about half recovering from the huge loss recorded in 2016. of our RCBs have not met the minimum capital There is also the urgent need for the Bank to requirement. I wish to use this opportunity to urge increase its capital base and this demands the directors gathered here to make efforts to raise accumulation of profits over time. We, therefore, the minimum capital. do not propose the payment of dividends for the year under review. The quality of banks’ loan portfolio continued to be of grave concern. According to Bank of Ghana, CORPORATE SOCIAL RESPONSIBILITY the Non-Performing Loans (NPLs) ratio, which is a measure of the industry’s asset quality, increased The Bank continues to spend on corporate social to 22.7 percent in December 2017 from 17.3 activities. In 2017, an amount of GH¢43,300.00 percent in December 2016, with over half of these (2016: GH¢54,300.00) was spent to support several loans in the loan loss category. worthy causes. THE BANK’S PERFORMANCE CHANGES TO THE BOARD Dear Shareholders, coming on the back of losses Distinguished Shareholders, Mr. Kojo Mattah was recorded last year which depleted our reserves appointed as the Managing Director for the Bank as well as the declining interest rates, your Bank during the year under review and became an managed to make a modest profit. It is worth automatic member of the Board. It is also worth stating that over 80% of the Bank’s revenue comes mentioning that at least four of us will be retiring from interest related activities which makes the from the Board by the end of the year after serving Bank overly sensitive to changes in interest rates. the maximum two three-year terms. The above conditions notwithstanding, your Bank managed to record improvement in most of the OUTLOOK important financial indicators. A moderate profit after tax of GH¢4.4 million was recorded compared On the global front, a shift toward protectionism in to the GH¢13.6 million loss recorded in 2016. advanced economies could reduce global growth Other financial indicators recorded as at December and trade, impede capital flows; and dampen