Performance of banking sector in 2021 was strong – BoG

The performance of the banking sector in 2021 was strong with sustained growth in assets, deposits, and investments, the Bank of Ghana (BoG) has said.

It said the banking industry recorded improvements in the financial soundness indicators as Capital Adequacy Ratio (CAR) and Non-Performing Loans (NPLs).

“In the year, total assets grew by 20.4 percent to GH¢179.8 billion as at December 2021.  From the peak of 17.3 percent in August 2021, the NPL ratio eased further to 15.2 per cent at end-December 2021. Comparatively, the NPL ratio was 14.8 per cent in December 2020,” the BoG said in a statement issued in Accra on Monday, after the Monetary Policy Committee (MPC) meeting to announce a new policy rate.

The policy or prime rate is the rate at which the BoG lends to commercial banks in the country.

The MPC held its 104th regular meeting last week to deliberate on recent global and domestic development and how they have shaped macroeconomic conditions and assessed risk to inflation and growth outlook, to decide the new policy rate which was maintained at 14.5 per cent.

The BoG said banking 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, adding that 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.”

It added “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.”

The BoG said operating costs increased by 14.2 percent, higher than the 8.2 percent growth for same period in 2020, adding 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 and profit-before-tax increased by 22.1 percent in 2021 to GH¢7.4 billion, below the growth of 27.2 percent in 2020.

The Central Bank said credit performance improved marginally, consistent with the gradual recovery in the real sector and 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.

It said 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.

The BoG said the COVID-19 regulatory policy measures were kept in place during 2021 and helped provide some support to lending activities of banks and 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 KINGSLEY ASARE

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