News Guide Africa

Tag: Ghana banks

  • 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.

  • Banks happy…as the cedi falls

    Banks happy…as the cedi falls

    By Elorm Desewu

    Some commercial banks in the country are happy in the wake of the speed depreciation of the country’s fait currency, the cedi, as it increases their net foreign assets in cedi terms.

    Like virtually everyone else, the banks publicly clamour for exchange rate stability but in reality they prefer at least some degree of cedi depreciation because it increases the value of their net foreign assets in cedi terms. 

    This by itself, increases a bank’s balance sheet size; but sometimes they go a step further and realize the profits derivable from the change in value by selling those foreign assets and thus earning foreign exchange translation gains.

    The Ghana cedi has depreciated by 4.70% to the US dollar within 45 days of 2022. It is the second worst performing currency in Africa, among 15 top performing currencies.

    It is presently trading at GHC7.15 to one US dollar on the forex market.

    The conditions that triggered the persistent depreciation of the cedi during the latter part of last year is expected to  persist till the end of the first half of 2022, Databank Research has projected.

    The local currency, it said, remains vulnerable to foreign portfolio outflows amidst the elevated import demand.

    The heightened uncertainty around Ghana’s fiscal outlook worsened the local currency’s woes in the latter part of 2021.

    “We expect these conditions to persist in first-half of 2022 in addition to corporate import demand as Ghana’s economy rebounds”, it said.

    According to the Monetary Policy Committee, (MPC), Ghana’s Gross International Reserves as at December 2021 stood at US$9.7 billion equivalent to 4.4 months of import cover. This compares with a reserve position of US$8.6 billion (4.0 months of import cover) at the end of 2020. 

    The Gross Reserves have since increased to US$9.9 billion as at 28th January 2022. The strong reserve position provided some buffers for the local currency in 2021. Cumulatively, while the Ghana Cedi depreciated by 4.1 percent and 3.1 percent against the US Dollar and Pound Sterling, respectively in 2021, the Ghana Cedi 5 appreciated by 3.5 percent against the Euro. In the same period of 2020, the Ghana Cedi recorded depreciations of 3.9 percent, 7.1 percent, and 12.1 percent against the US Dollar, the Pound Sterling, and the Euro, respectively.