As almost everyone has heard by now, GCB Bank has taken over UT Bank and Capital Bank. In a statement, the BoG, announced that it had revoked the licenses of the two ailing banks as they have become insolvent i.e. their liabilities exceed their assets.
The central bank has already provided an informative FAQ about the takeover which I recommend you should read if you have any questions.
In this post, I would like to quickly take a look at the performance of UT Bank shares on the GSE over the years. The IPO that was supposed to be an indication of the development of the Ghanaian capital market has ended in a painful crash. One can only imagine how investors who bought into the promise and have held on till now will be feeling.
As seen from the chart above UT Bank stock in the first 3 years looked like it had some promise but then it crashed and never truly recovered. In January this year trading of the stock was halted after the bank failed to present audited accounts on time. That was certainly a warning sign, but few would have seen the end coming so near. After all, the bank received approval to raise GH¢200m fresh capital about a year ago.
The stock has fallen by a mind-boggling 81.25% since 2010. Of course, stock holders would have got some dividends during the time, but the collapse of the stock price, inflation and returns the money could have earned elsewhere shows that buying UT Bank shares would’ve been a terrible investment.
I hope that this does not discourage would-be investors in the capital market. Not all investments will do well, just as not all will fail. Diversification remains as important as ever.