Banks operating in Ghana wrote off GH¢2.086 billion as bad debt in 2021, a 4.7 per cent decline over the previous year, the Domestic Money Bank’s Income Statement by the Bank of Ghana (BoG), has revealed.
In 2020, the provision for bad debt was GHc2.183 billion.
The provision for the bad debt was as a result of loan losses, depreciation, among others.
According to the Monetary Policy Report, asset quality risks have remained elevated this year compared to last year due to repayment challenges associated with the COVID-19 pandemic as well as some bank-specific loan recovery challenges.
Subsequently, the NPL ratio increased from 14.8 per cent in December 2020 to 15.2 per cent in December 2021.
This was attributed to the combined effect of an increase in the stock of NPLs by 16.0 per cent to ¢8.2 billion, as well as a modest growth in the stock of gross loans by 12.6 per cent over the period.
The adjusted NPL ratio excluding the fully provisioned loan loss category however, improved to 5.8 per cent from 6.5 per cent in the previous year, an indication that the increase in the NPL ratio was due to a build-up of loss category loans.
The rise in the NPL ratio was mainly driven by a marginal increase in the private sector NPL ratio from 15.9 per cent in December 2020 to 16.2 per cent in December 2021, while the public sector NPL ratio increased from 3.3 per cent to 6.1 per cent over the same period.
The increase in the industry NPL ratio reflected mainly in the construction; agriculture, forestry and fishing; transport, storage and communication; and the commerce and finance sectors.
The NPL ratio of the construction and the agriculture, forestry and fishing, and the commerce and finance sectors increased by 12.7 percentage points, 9.2 percentage points and 2.9 percentage points to 35.2 per cent 29.0 per cent and 20.3 per cent , respectively, during the review period.
Additionally, the transport, storage and communication sector recorded an increase in its NPL ratio by 6.0 percentage points to 13.7 per cent over the same comparative period.
The Central Bank said all other economic sectors recorded declines in the NPL ratios during the review period with the greatest improvement in the quality of the loan portfolio attributed to the electricity, water and gas sector.
Meanwhile, banks reported a net tightening in the overall credit stance on loans to enterprises during the December 2021 Credit Conditions Survey relative to the October 2021 survey round.
Banks, therefore, project a further tightening in the overall credit stance on enterprise loans in the first two months of 2022, in line with past trends.
“The expected net tightening in the stance on corporate loans is from a projected net tightening in the stance on loans to all sub-categories of enterprise loans”, the Central Bank added. – Myjoyonline.com
