Togo: Government set to bail out Union Togolaise de Banque on own funds

Tuesday, 06 February 2024 18:18
Togo: Government set to bail out Union Togolaise de Banque on own funds

(Togo First) - The government of Togo plans to bail out the Union Togolaise de Banque (UTB), a State-owned lender. According to the country’s 2024 finance bill, Lomé will invest CFA13 billion in the rescue mission.

Besides this investment, the government announced a CFA66.9 billion allocation to buy the bank’s branches. Lomé will use some of the money to buy back other infrastructure from UTB and IB Bank, another lender acquired by the State in 2021

UTB is Togo’s last fully-owned State-bank. The bank has been struggling for almost a decade. Its low equity capital kept investors at bay.

The bank’s ordeal is partly due to the composition of its loan portfolio. The latter is highly exposed (around a third of its total loans) to the government and industries that need revamping–notably, the cotton and phosphate industries. Also, the bank’s non-performing loans (NPLs) rate is substantial, which impairs its lending viability.

Between 2018 and 2020, the government hesitated between bailing out and privatizing the bank. The IMF preferred the second option, as it was concerned about the cost of the first for Lomé. 

Finally, the government opted for a mix of both options. After some inquiring, Togo First found out that Lomé recently sealed a 42-month $400 million deal with the IMF to save the bank. This deal, however, should deepen the country’s budget deficit by 1.1% of its GDP. 

Nevertheless, Lomé believes that the rescue mission will generate revenues in the short and medium terms. However, no details have been released on the amortization schedule for the investment so far. Still, the government is confident its move will consolidate the country's financial sector. A sentiment not shared by all. 

It is worth noting that Sunu Bank and Coris Bank positioned themselves last year to take over the UTB. Sunu Bank, however, later withdrew. Coris Bank, according to our sources, is still open to the acquisition.

Fiacre E. Kakpo

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