News Guide Africa

Tag: Banks asset

  • BoG urges banks to tender capital restoration plan for a progressive recapitalization 

     

     

    Adnan Adams Mohammed

     

    Bank of Ghana (BoG) Governor has asked all commercial banks operating in the country to tender their ‘capital restoration plans’ for a ‘progressive recapitalization’ over a three-year period.

     

    The recapitalization exercise is as a result of a turnaround in banks’ profits and planned equity capital injections. The aim is to rebuild banks’ capital buffers, enhance resilience, and position the sector to support the country’s growth agenda.

     

    In 2022, the industry collectively posted losses of GH¢8.0 billion, compared to a profit of GH¢7.4 billion in 2021. Key profitability indicators such as return-on-assets and return-on-equity turned negative due to these losses.

     

    “The 2022 audited financial statements of banks reflected the challenging operating environment of that year. Most banks reported significant mark-to-market valuation losses on their holdings of government bonds, along with higher impairments on loans and rising operating costs”, Dr. Ernest Addison said while addressing the banking sector’s performance during the 60th-anniversary launch of the Chartered Institute of Bankers Ghana in Accra last week.

     

    However, Dr. Addison shared some positive news, stating that the banking sector’s data for the first half of 2023 showed improved performance, despite declines in some key financial soundness indicators. This improvement came after industry stakeholders reached a consensus on how to address the losses and with the timely introduction of temporary prudential and regulatory reliefs by the Bank of Ghana.

     

    Prudential data revealed that banks had rebalanced their portfolios from medium- and long-term investments to short-term investments, with gradual increases in new loans. As of June 2023, the total assets of the banking industry amounted to GH¢242.4 billion, indicating a 21.2 percent annual growth compared to 22.8 percent growth in June 2022. This asset growth was primarily driven by investments, particularly in short-term investments, while medium to long-term investments declined.

     

    Despite increased income levels, the banking sector saw rising costs, reflecting the challenges of the operating environment. However, the increase in costs did not outweigh earnings, resulting in a strong profit-before-tax for the first half of the year. Profits showed a remarkable 51.2 percent increase in June 2023 compared to the same period in the previous year. Similarly, the industry’s net income or profit-after-tax increased to GH¢4.3 billion from GH¢2.8 billion, representing a 51.4 percent increase in June 2023.

     

    Overall, Dr. Addison indicated that the banking sector’s performance had improved in the first half of 2023.

     

    He further noted that for the remainder of the year, the banking sector is expected to remain broadly stable, supported by regulatory reliefs and sustained growth in profitability.

     

  • Banks record GHC1.3b profit…for 1st two months of 2022

    Banks record GHC1.3b profit…for 1st two months of 2022

    By Elorm Desewu

    Banks’ profitability has improved slightly over the first two months of 2022, recording a profit before tax of GH¢1.3 billion, compared to GH¢1.1 billion during the same period last year.

    The growth in net interest income dropped marginally recording 10.3 percent to GH¢2.2 billion, compared to 10.9 percent a year ago. Net fees and commissions grew by 11.8 percent to GH¢486.8 million, lower than the growth of 13.7 percent registered during the same period last year.

    Other income of the banks stood at GH¢383.2 million, representing 95.5 percent growth, compared with a contraction of 16.5 percent in the same period last year. These developments resulted in a 16.9 percent growth in operating income to GH¢3.1 billion, compared with a growth of 8.7 percent in the corresponding year. However, operating expenses went up by 21.3 percent on account of higher administrative costs and emoluments, relative to a contraction of 0.3 percent in the same period last year.

    Developments in the banking sector over the first two months of 2022 show continued strong asset growth. Total assets stood at GH¢187.8 billion in February 2022, representing 23.5 percent annual growth, compared with 18.5 percent growth in the previous year.

    The growth in assets was on the back of increased deposits and borrowing. Total deposits recorded a year-on-year growth of 18.2 percent to GH¢123.0 billion. Borrowing increased significantly by 78.8 percent to GH¢25.5 billion, relative to the contraction of 23.4 percent in the previous year.

    The rebound in credit growth continued in the first two months of 2022, with a 70.7 percent increase in New Advances to GH¢8.0 billion, compared with 24.6 percent growth in the same period last year. 15. Trends in the financial soundness indicators remained positive, underpinned by strong solvency, liquidity, and profitability.

    The Capital Adequacy Ratio of the Industry was 19.6 percent at end-February 2022, well above the current 11.5 percent regulatory minimum threshold. Core liquid assets to short-term liabilities was 24.2 percent in February 2022, compared with 26.5 percent in the previous year.

    Improvements in asset quality continued into 2022, with the Non-Performing Loans (NPL) ratio declining to 14.4 percent on average, at end-February 2022, compared with the NPL ratio of 15.3 percent in February 2021.

    Credit to the private sector continued to recover, consistent with the rebound in economic activities. In nominal terms, annual growth in private sector credit increased significantly to 17.1 percent in February 2022 compared with 7.4 percent in the same period of 2021.

    In real terms, private sector credit grew by 1.2 percent relative to a contraction of 2.7 percent, over the same comparative period. The latest credit conditions survey revealed tightened credit stance on loans to enterprises. However, demand for credit by households and small and medium sized enterprises are projected to increase in the near to medium-term.