By Elorm Desewu
Universal banks in the country have marginally dropped their interest rates on loans, according to figures from the Bank of Ghana.
The average lending rates of banks declined to 27.8 percent from 29.3 percent over the same comparative periods.
The weighted average interbank lending rate, that is, the rate at which commercial banks lend to each other, also declined to 15.6 percent in February 2019 from 18.3 percent same period last year, in line with the monetary policy rate.
An assessment of the banking sector shows that the recently recapitalized banking sector is profitable, liquid and solvent exhibiting strong growth prospects in the outlook.
In the first two months of 2019, the banking sector posted a stronger after-tax income. Total assets stood at GH¢108.9 billion, representing an annual growth of 14.5 percent in the year to end-February 2019. The growth in total assets was funded mainly from increased deposits and equity injection from the recapitalization exercise.
Key financial soundness indicators of the industry have also improved, with the Capital Adequacy Ratio (CAR) at 21.7 percent in February 2019, significantly higher than the prudential requirement of 10.0 percent.
The improved solvency enhances the banking sector’s capacity to deepen financial intermediation and strengthens banks’ resilience to shocks going forward. Also, profitability ratios improved while liquidity measures remain broadly adequate.
The Non-Performing Loans (NPL) ratio has declined from 21.6 percent in February 2018 to 18.2 percent in February 2019, signalling some moderation in the industry’s exposure to credit risk. The on-going write-off policy and strengthening of bank’s risk management practices is expected to further impact positively on the industry’s NPLs going forward.