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Tuesday, November 30, 2021

Credit To Private Sector Slows

THE LATEST Monetary Policy Committee (MPC) report by the Bank of Ghana (BoG) indicates that annual nominal growth in private sector credit slowed to 10.1 percent in October 2021 compared with 13.4 percent a year ago.

In real terms, private sector credit contracted marginally by 0.8 percent compared with a 3.0 percent growth, recorded over the same review period.

Also, new loans and advances for the year thus far by banks, totaled GH¢28.4 billion in the year to October 2021, marginally above the GH¢27.1 billion for the same period in 2020.

Dr Ernest Addison, Governor of the BoG, who read the report, said “Trends in the private sector indicate some modest recovery in credit extension, although the year-on-year comparison suggests sluggishness, which broadly reflects the lingering pandemic-related risk aversion on the part of credit institutions,”

According to him, the banking sector remained sound, and well-capitalised with strong growth in total assets, investments and deposits.

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In the first ten months of the year, total assets increased by 16.1 percent to GH¢173.8 billion, reflecting strong growth in investments in government securities by 25.5 percent to GH¢83.4 billion. The gradual growth in gross advances has continued, with 8.9 percent growth as at end October 2021 compared to the end-June position of 5.2 percent growth. Deposits grew by 17.2 percent year-on-year to GH¢117.4 billion on the back of strong liquidity flows.

Also, he said the industry’s Capital Adequacy Ratio of 19.8 percent as at end-October 2021 was well above the current regulatory minimum threshold of 11.5 percent.

Core liquid assets to short-term liabilities was 24.6 percent in October 2021 compared with 27.0 percent in October 2020. Net interest income grew by 15.2 percent to GH¢10.5 billion, compared with 19.9 percent growth over the same review period. Net fees and commissions recorded a stronger growth of 22.9 percent to GH¢2.3 billion, relative to 6.1 percent growth for same period last year, reflecting continued recovery in trade finance-related and other ancillary businesses of banks.

Accordingly, total operating income grew by 14.3 percent to GH¢14.1 billion, marginally lower than the previous year’s growth of 16.6 percent. Operating costs increased by 11.0 percent, relative to the 9.9 percent growth for same period in 2020. Growth in loan loss provisions, however, moderated to 6.5 percent as at end-October 2021 from 18.9 percent a year ago. These developments resulted in profit before tax of GH¢6.0 billion, representing a year-on-year growth of 21.8 percent at the end of October 2021.

Asset quality has improved somewhat in the course of the year. The Non-Performing Loans (NPL) ratio declined to 16.4 percent in October 2021 from 17.3 percent recorded in August 2021. A year ago, however, the NPL ratio was 15.3 percent in October 2020.

BY Samuel Boadi

 

 

 

 

 

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