NPLs declines but still high
According to the Bank of Ghana in its November 2018 banking sector report, banks in the country are moving away from lending to investments as they restructure their balance sheets.
The report puts together the financial position of the 30 banks in the country as at October 2018. The report indicates that 13 of these banks are locally-controlled while 17 are foreign-controlled.
Bank asset allocation for the period under review, October 2018 were as follows:
–40.3% to investments
–28.7% to loans and advances
–23.7% to cash and due from banks
–3.6% to fixed assets.
In comparison to October 2017, banks allocated their assets as follows:
–29.6% to investments
–35.8% to loans and advances
–25.1% to cash and due from other banks
–3.9% to fixed assets. Over a one-year period, bans have significantly increased their allocations to investments and reduced their allocation to lending. Why? According to the Bank of Ghana, “The increase indicates banks’ preference for long-term and less risky assets as against credit extension which is associated with increased risk due to the industry’s high stock of nonperforming loans.”
The report highlights the fact that there has been an improvement in the key indicators used to judge growth in the sector. The regulator expects this growth to continue on completion of the bank recapitalization process and together with ongoing reforms, including supervisory vigilance and strict enforcement of prudential regulations.