Dr. Ernest Addison
THE PERFORMANCE of Ghana’s banking sector in 2021 pointed to sustained growth in assets, deposits, and investments alongside improvements in the financial soundness indicators.
In the year, total assets grew by 20.4 percent to GH¢179.8 billion as at December 2021.
Asset quality, however, continued to reflect the general pandemic-induced repayment challenges as well as some bank-specific loan recovery challenges.
According to the Bank of Ghana, in its latest monetary policy committee (MPC) report, from the peak of 17.3 percent in August 2021, the NPL ratio eased further to 15.2 percent at end-December 2021 adding that comparatively, the NPL ratio was 14.8 percent in December 2020.
It said the industry remained solvent with the average industry CAR of 19.6 percent well above the 11.5 percent regulatory minimum threshold. “Core liquid assets to short-term liabilities was 25.9 percent in December 2021 compared with 27.8 percent a year ago.
“Net interest income grew by 14.5 percent to GH¢12.8 billion, lower than the growth of 20.9 percent a year ago partly due to decline in interest rates. Net fees and commissions however recorded a 24.8 percent growth to GH¢2.9 billion, compared with 5.0 percent last year, reflecting continued recovery in trade finance-related and other businesses of banks.
“This resulted in a 14.6 percent growth in total operating income to GH¢17.4 billion, compared with 17.9 percent growth last year. Operating costs increased by 14.2 percent, higher than the 8.2 percent growth for same period in 2020,” it mentioned.
It continued that loan loss provisions however, contracted by 4.7 percent as at end-December 2021 from the 28.0 percent growth recorded a year ago, following the reversal of over-provisioning at the height of the pandemic in 2020.
“Profit-before-tax increased by 22.1 percent in 2021 to GH¢7.4 billion, below the growth of 27.2 percent in 2020.
“Credit performance improved marginally, consistent with the gradual recovery in the real sector. Annual nominal growth in private sector credit increased to 11.2 percent in December 2021 compared with 10.6 percent, in the corresponding period of 2020.
“However, sustained price pressures weighed on real private sector credit, which contracted by 1.3 percent compared to a modest growth of 0.2 percent, over the same comparative period,”
Additionally, it said the COVID-19 regulatory policy measures were kept in place during 2021 and helped provide some support to lending activities of banks. “New Advances extended by the commercial banks to the economy was GH¢36.4 billion, registering a growth of 6.8 percent compared with new advances of GH¢34.1 billion extended in 2020.”
BY Samuel Boadi