BANKS in Ghana wrote off GH¢1.33 billion as bad loans in the first 10 months of 2019, compared to GH¢1.14 billion last year.
This is 16.7 percent increment over the previous year.
According to the November 2019 Banking Sector Report released few days to the end of the year, the bad debt included loan losses, depreciation among others.
The stock of the industry’s Non-Performing Loans (NPLs) also edged up marginally to GH¢¢7.19 billion in October 2019 from GH¢7.14 billion a year ago.
The marginal increase in the stock of NPLs in October 2019 vis-à-vis the higher growth in total loans contributed to the lower NPL ratio of 17.3 percent from 20.1 percent for the same comparative period last year.
This comes though the industry’s asset quality broadly improved during the period under review due to the implementation of loan write-offs and intensified recoveries.
The industry’s NPL ratio adjusted for the fully provisioned loss loan category improved to 8.1 percent in October 2019 from 11.4 percent in October 2018. This point to the fact that the industry’s stock of NPLs could be reduced further with implementation of the loan write-off policy, intensified loan recoveries, and stronger credit risk management practices.
The private sector’s share of the banking industry’s NPLs however increased to 97.7 percent in October 2019 from 95.5 percent in October 2018, while the share of NPLs contributed by the public sector declined to 2.3 percent from 4.5 percent over the same period.
This shows that the pick-up in the banking sector’s loans to the public sector has not been associated with deterioration in the quality of loans to that sector.
The breakdown of the industry’s NPLs by economic sectors revealed broad improvement in the NPL ratios across most of the sectors with the exception of mining and quarrying.
The distribution further showed that the electricity, water and gas sector had the highest NPL ratio (impaired loans to the sector/total loans to the sector) of 32.1 percent as at October 2019, an improvement over the 44.4 percent a year ago, while the agriculture, fishing and forestry sector had an NPL ratio of 27.6 percent, also an improvement over the 32.4 percent recorded during the same comparative period.
The largest recipient of the industry’s credit, the services sector, recorded an NPL ratio of 12.9 percent in October 2019 compared with 14.1 percent in the prior year.
Broadly, the report said these trends show improvement in the industry’s asset quality.
Credit Analysis
According to the report, credit growth rebounded in October 2019 compared to the contraction a year ago.
Gross loans and advances (excluding the loans under receivership) increased by 17.2 percent to GH¢41.65 billion in October 2019 from GH¢35.53 billion (-7.6 percent y/y growth) in October 2018.
Private sector credit also recorded a rebound in growth by 13.1 percent to GH¢37.13 billion during the review period after contracting by 3.1 percent in October 2018 to GH¢32.82 billion.
Credit to households however declined from GH¢8.64 billion representing 47.2 percent annual growth to GH¢8.48 billion representing a contraction of 1.8 percent during the period under review, partly reflecting base drift effects.
….Banks profit up 45%
Meanwhile, the banking industry posted stronger profits during the first 10 months of 2019 which translated into improved profitability indicators.
The industry’s net income (profit after-tax) recorded a yearly growth of 45.3 percent to GH¢2.83 billion in October 2019 compared with the 22.3 percent growth amounting to GH¢1.59 billion recorded during the same period last year.
The increase in the net income was on the back of significant increases in net interest income and fee and commission income, while operating cost was contained. The industry’s net interest income grew by 23.9 percent to GH¢7.56 billion compared with the 0.3 percent contraction to GH¢6.10 billion recorded in the same period a year ago.
On a year-to date basis, net fees and commissions was GH¢1.79 billion in October representing a slower year-on-year growth of 12.3 percent compared with GH¢1.59 billion in October 2018.
Growth in operating expenses however picked up on account of staff costs and other operating expenses. The industry’s staff cost of GH¢2.85 billion during the first ten months of 2019 was 15.5 percent higher than the GH¢2.47 billion recorded during the same period in 2018.
Source: Augustine AMOAH, thefinderonline.com