HFC to buy back shares; To enhance share price appreciation

HFC Bank (Ghana) Limited has secured its shareholders’ approval that would enable it to make a five per cent maximum buy back share purchase of the bank.
The  move, the bank said, was expected to help push its share price to an “appreciable level.”
The share price of the bank on the stock market has over the years remained low despite the bank’s impressive performance, a situation the managing director of the Ghana Stock Exchange last attributed to “too much institutional shareholding of the company’s shares.”
At an Annual General Meeting held in Accra, the shareholders passed a special resolution that gave the bank the authority “to make market purchases of the company’s ordinary shares up to a maximum of five per cent of its issued share capital and to operate a share capital deals accounts for that purpose.”
The shareholders also passed another resolution that allows the bank to convert the equivalent of US$2million invested by the Aureos Africa Fund as convertible bonds in the bank to ordinary shares without “first offering them to all existing shareholders.”
Managing Director of the HFC Bank, Mr Asare Akuffo, would, however, not comment on the expected impact of those two resolutions on the bank’s performance in the coming years except to say “buy back is not something new in the bank.”
The Chairman of the bank’s Board of Directors, Nana Agyei Duku, said the bank’s profit after tax in 2010 was GH¢8.6 million, a 49.7 per cent leap from its 2009 figure.
According to him, the bank’s continuous expansions in its branch networks had “resulted in an increase in customer deposits by 27 per cent to GH¢156.5million last year.”
The Chairman said the board had thus recommended a dividend of GH¢0.016 per share, a difference of GH¢0.001 from the previous two year’s dividend figure of GH¢0.015.
But some shareholders at the AGM said the recommended dividend was “woefully inadequate” taking into consideration the “impressive performance of the bank within the year.”
“The dividend, I think is on the downside; it is woefully inadequate. The increase from the previous year’s dividend is just GH¢0.001 which is nothing to write home about,” Mr Smauel Akwasi Adiku, a shareholder of the bank said at the AGM.
According to him, “the bank wanted to keep the rest of the money so that it can use it to buy back the extra shares. But I think there’s an alternative solution; pay us high dividend so that the share price would rather rise,” Mr Adiku further advised.
The Managing Director, Mr Asare Akuffo, however, disagreed that the recommended dividend was on the low side and said that “it is the question of how many shares you have. If compared to our peers in the industry, our is even on the higher side.”
He thus called on the shareholders to “invest more in the bank so that you can get more dividends because some shareholders would be taking away as high as GH¢5,000 and GH¢110,000 just because they have invested heavily in the bank.”
On the bank’s outlook for 2011, Mr Akuffo said the bank would be focusing much of its attention on “growing its mortgage portfolio”.
He said the expected increase in the supply of the middle income residential properties should have a major boost to our home loan business and “HFC Realty Limited, a subsidiary of the bank would be a major contributor to the supply of new homes on the market.”
According to the MD, although margins are expected to be lower in 2011 due to competitive pressures and the general reductions in interest rates and growth in assets of the bank “expansions in the other business areas and cost control should compensate for the downward pressure on the earnings.”