By Elorm Desewu
Banks are beginning to close their tap for lending to the private sector, as its credit to the sector contracted by 1.3 percent at the end of December, 2021 compared with a modest growth of 0.2 percent recorded during the same period in 2020.
Private sector credit growth is steadily picking up but remains negative in real terms. Credit performance improved marginally, consistent with the gradual recovery in the real sector.
The 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. However, 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 COVID19 regulatory policy measures were kept in place during 2021 and helped provide some support to lending activities of banks. 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.
According to the Bank of Ghana, (BoG), the expectation is for the banks to continue providing new advances to the economy to support private sector credit growth and boost economic activity.
Banks’ year on year profitability growth have declined recording 22.1 percent or GHC7.4 billion compare with 27.2 percent in 2020.
Notwithstanding the decline in the profit growth, the industry remained solvent with the average industry Capital Adequacy Ratio (CAR) of 19.6 percent which is 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.
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. 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. Operating costs increased by 14.2 percent, higher than the 8.2 percent growth for same period in 2020.
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.