Asset quality in the banking sector improved following enforcement of the loan-write off directive issued in June 2018. Consequently, non-performing loans (NPLs) declined to GH¢6.65 billion in December 2018 from GH¢8.19 billion in December 2017, representing 18.9 percent contraction against a 33.4 percent growth recorded a year ago.
The loss component of NPLs contracted by 32.4 percent and accounted for 49.2 percent of total NPLs in December 2018 compared with a growth of 40.1 percent and a share of 59.0 percent a year ago. Accordingly, the ratio of NPLs to gross advances declined to 18.2 percent from 21.6 percent during the review period.
Also, the industry’s NPL ratio which was adjusted for fully-provisioned loss-category loans increased marginally to 11.7 percent in December 2018 from 11.3 percent in December 2017, signalling a slight uptick in the proportion of the substandard and doubtful loans in NPLs
The Commerce & Finance sector, the largest recipient of industry credit also accounted for the biggest share of industry NPLs of 25.4 percent. The Mining and Quarrying sector, being the least recipient of credit, accounted for the least share of 1.3 percent.
However, the Electricity, Gas and Water sector with a share of 8.6 percent of outstanding credit balances accounted for the second largest share of industry NPLs of 17.8 percent. Notably, the sector had the highest NPL ratio of 37.8 percent.
The Commerce & Finance sector recorded an NPL ratio of 18.8 percent indicating that almost a fifth of loans to the sector had been downgraded. Credit risk to the Mining & Quarrying sector appeared better managed than all the other sectors with only 7.2 percent of the total loans to the sector being classified as non-performing.
