Banking: Togolese Government Buys Back UTB and IB Headquarters

Finance

Tuesday, 21 January 2025 08:47

Banking: Togolese Government Buys Back UTB and IB Headquarters

(Togo First) - The Togolese government has repurchased Union Togolaise de Banque (UTB) headquarters and IB Bank to help stabilize these struggling banks, which hold 20% of Togo's banking sector assets. The IMF has advised that after UTB completes its restructuring, the government should consider privatizing the lender.

Last year, the government took control of the buildings. These banks account for 20% of Togo's banking sector assets. The IMF confirmed that buying UTB's head office alone cost CFA31 billion.

UTB: Positive Equity at Last

UTB has struggled with negative equity for years, but it is starting to recover thanks to this acquisition and an additional capital injection of CFA12.6 billion. An independent audit shows that the bank is getting closer to meeting the capital requirements set by the WAEMU Banking Commission. However, a restructuring plan must be completed by April 2025, with full implementation by October. During this time, UTB will remain under public control before being privatized.

This plan will be based on findings from an external audit conducted in 2023 and aims to ensure UTB's profitability and stability while it is still publicly owned. The IMF encourages authorities to pursue privatization soon after restructuring to reduce long-term financial risks.

IB Bank: Mixed Signals

IB Bank, which was sold to Burkinabe businessman Mahamadou Bonkoungou in 2021, has had mixed results. Selling its former headquarters has eased some financial pressure and improved its regulatory capital but has not guaranteed stability. A reform plan is already in place and has been submitted to the banking commission. This plan includes increasing capital from private sources, reducing loans linked to shareholders, and withdrawing loans from institutions with negative equity. The IMF warns that without significant private investment and these reforms, IB Bank will continue to face structural challenges.

Despite these issues, IB Bank is starting to recover. After several years of losses, it returned to profit in 2024. Reports suggest these positive results should continue this year, supported by significant write-backs of provisions and a focus on government commitments.

A Hefty Bill

These actions are costly. The Togolese government set aside over CFA69 billion ($108.2 million) in its 2024 budget to support both banks. The IMF notes that this spending could worsen an already strained public deficit, estimating that restoring the banking sector might cost 1.5% of GDP.

According to the Togolese officials, there is a need to improve governance and economic fundamentals to prevent the banking sector from declining further. Some IMF documents reviewed by Togo First reveal that two smaller banks representing 9% of sector assets have started failing to meet prudential standards according to IMF documents. The same source indicates that one bank exceeds limits on non-operational assets and capital requirements; the other breaches risk concentration standards.

Fiacre E. Kakpo

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