Banks remain robust amid scary COVID 19
By Elorm Desewu
The impact of the scary
COVID 19 pandemic on the banking industry’s performance seems moderate as banks
remained liquid, profitable and well-capitalized.
The banking sector has
remained strong through end-February 2021, with robust growth in total assets,
deposits and investments, according to the Bank of Ghana, (BoG).
Total assets increased by
18.5 percent on a year-on-year basis to GH¢152.0 billion, reflecting strong
growth in investments in government securities by 45.9 percent to GH¢67.9
billion.
Total deposits recorded a
year-on-year growth of 25.1 percent to GH¢104.0 billion reflecting strong
liquidity flows emanating from the COVID-19 fiscal stimulus, payments to
contractors, SDI depositors, and clients of SEC-licensed fund managers.
Financial soundness
indicators remained positive underpinned by robust solvency, liquidity, and
profitability indicators. The industry’s Capital Adequacy Ratio was 20.2
percent at end-February 2021, well above the regulatory minimum threshold.
Core liquid assets to short-term
liabilities was 26.5 percent in February 2021 compared with 31.3 percent a year
ago. Net interest income for the first two months grew by 10.9 percent to
GH¢2.0 billion compared to 25.9 percent a year ago.
Net fees and commissions
grew by 13.7 percent to GH¢435.4 million, compared with 18.4 percent growth
recorded during same period last year, reflecting the observed dip in growth in
loans and trade finance-related businesses.
Operating income rose by 8.7
percent, lower than the corresponding growth of 23.6 percent, but was supported
by cost control measures which resulted in operating expenses declining by 0.3
percent, in contrast to the 18.6 percent increase for same period in 2020. Loan
loss provisions, however, grew sharply by 62.2 percent, significantly higher
than the 6.5 percent a year ago, reflecting continued elevated credit risks.
Profit before tax, increased
to GH¢1.1 billion over the first two months of 2021 compared to GH¢1.0 billion
the same period last year.
Notwithstanding the sluggish
credit demand and supply conditions due to the pandemic, the COVID-related
regulatory reliefs and policy measures continue to support lending activities,
with New Advances for the first two months in 2021 totalling GH¢4.7 billion.
The latest Credit Conditions
Survey shows that banks expect an increase in demand for credit and are
signalling an ease in credit stance over the next two months. Non-Performing
Loans (NPL) ratio increased from 13.8 percent in February 2020 to 15.3 percent
in February 2021 arising partly from the general pandemic-induced repayment
challenges as well as some bank-specific loan recovery challenges.
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