The Managing Director of HFC Bank, Asare Akuffo, has asked the Bank of Ghana (BoG) -- the sector regulator -- to refrain from any attempt to engineer mergers and acquisitions of banks in the country as concerns rage over the number and capacity of banks to finance big-ticket transactions.

There are currently about 28 universal banks in the country, comprising 15 foreign-owned banks; 10 private domestic banks; and three government-controlled banks.

There are also about 24 saving and loans companies, and over 390 micro-finance institutions.

This has raised concerns about the strength in depth of universal banks in the country to undertake large transactions. Critics have pointed to the reforms in the Nigeria banking sector in 2004, which reduced 89 banks in the West African Country to 25 well-resourced banks able to undertake large transactions.

Mr. Franklin Belnye, Director, Banking Supervision of the BoG said: “our banks are small, and this limits their capacity to undertake big-ticket transactions and impacts their ability to leverage on economies of scale”.

Mr. Akuffo however believes that given the challenging environment the sector is operating in, the regulator should stay off the banks. “Leave them alone. We are doing quite well in a very difficult environment, and this is not time to introduce new policies that will shake up the system,” he said.

He was speaking at the 2014 PwC's Financial Services Executive Breakfast Meeting held on the theme “The future of banking in Ghana...what's next?" to present the PWC's 2014 Ghana Banking Survey report.

“Only a few banks are doing well in terms of profitability. Other banks are just making enough money to satisfy their shareholders. Banks in Ghana generally cannot be said to be too profitable,” he said.

The study identified 2013 as one of the toughest years in the country’s banking industry over the past decade. The study found that despite the growth in the industry’s total assets grew by 33 percent in 2013 compared to the five-year historic (2008-2012) average growth rate of only 26 percent, there was a slowdown in deposit mobilisation by the industry in 2013.

In the year under review, the industry’s deposits grew by 27% compared to the five-year historic (2008 – 2012) average growth rate of 28%. 2013 saw banks competing fiercely with one another to grow their respective deposits.

The industry as a whole, the survey found, also came under attack in the customer deposits market -- with the biggest threats posed by government and some non-traditional sources, such as savings and loans companies (S&Ls) and finance houses.

According to the survey, bank executives who participated are optimistic that the industry is on the brink of a period of significant transformation. They identified four key factors will drive the biggest transformation in the country’s banking industry over the coming five years.

These are competition, legislation and regulations, technology, and performance of the domestic economy.

Competition in the banking sector over the next five years, according to the survey, is expected to be driven by existing and potential new entrant foreign banks, including regional banks

The banking sector has without doubt been one of the business segments to have been visibly impacted by recent economic trends and policy actions.

Mr. Felix Addo, Senior Country Partner, PwC, Ghana, said banks often get blamed for high interest rates and are also criticised for making big profit when other businesses simply shrink or fold-up when the macroeconomic environment heats up.

“Needless to say, banks think of themselves differently,” he said, and maintained that the past couple of years are among the most challenging periods they have weathered. Senior bank executives we spoke to are of the view that had the current economic environment been more genial, they could have generated even greater value for all their stakeholders; including their customers, shareholders, and government. Still, bank executives noted during our survey that they remain generally optimistic about the future.

Many of the executives have already begun a switch from a ‘watch and see’ mode to a ‘position and grow’ mode in anticipation of changes in the economy going forward.”

He said: “The changes banks are making within their organisations now have less to do with sheltering from competitive, regulatory and economic headwinds and more to do with preparing for the future.

Fifty-nine percent of participating bank executives are confident that transformations in the banking sector will result in an overall positive impact on the future of banking in Ghana over the next 5 years.

“Additionally, a majority of bank executives feel well prepared on most accounts to make the most of opportunities and overcome challenges in banking over the next 5 years.”

Dr. Emmanuel Oteng Kumah, Chairman of KEDSS Economics said: “Ghana’s economic growth will be hampered inordinately for a long time if conditions are not germane for the banking sector to play its proper role in financing industry, commerce, agriculture and indeed the public sector as will be necessary given the dearth of finance in a developing economy like Ghana”.