Ghana’s banking sector showed resilience to the first wave of the pandemic supported by strong policy support and regulatory reliefs.
The central bank said the “banking sector performance remained strong through end 2020, with robust growth in total assets, deposits and investments. Overall, the impact of Covid-19 on the industry’s performance was moderate as banks remained liquid, profitable and well-capitalized. Total assets increased by 15.8 per cent, of which Investments in government bonds rose by 33.4 per cent.”
It also highlighted, “Solvency and liquidity indicators remained strong. The industry’s CAR of 19.8 per cent as at end December 2020 was also well above the regulatory minimum threshold. Core liquid assets to short term liabilities were estimated at 27.8 per cent in December 2020 compared with 30.5 per cent a year ago. Net interest income grew by 20.9 per cent to GH¢11.2 billion compared to 24.9 per cent a year ago. Net fees and commissions grew by 5.0 percent to GH¢2.3 billion, lower than the growth of 16.5 percent recorded in the prior year, reflecting the dip in growth of credits and other trade finance-related businesses. Operating income rose by 17.9 per cent whilst operating expenses rose by 8.2 per cent, albeit lower than the respective growth rates of 21.1 per cent and 12.1 per cent in 2019. Loan loss provisions grew by 28.0 per cent, higher than the 23.6 per cent a year ago reflecting elevated credit risks in 2020. Profit before tax increased by 27.2 per cent to GH¢6.1 billion compared to 34.7 per cent a year ago.
The BoG added that the implementation of the Covid-related regulatory reliefs and policy measures helped to support lending activities, adding that new advances in 2020 grew by 15.8 per cent to GH¢34.4 billion in 2020.
Banks provided support and reliefs in the form of loan restructuring and loan repayment moratoria to cushion 16,694 customers severely impacted by the pandemic. Total outstanding loans restructured by banks as at December 2020 amounted to GH¢4.47 billion, representing some 9.4 per cent of industry loan portfolio. Non-Performing Loans (NPL) ratio increased from 14.3 per cent in December 2019 to 15.7 per cent in June 2020 arising from the pandemic-induced repayment challenges, but declined to 14.8 per cent in December 2020 due to loan write-offs and increased credits, particularly during the last quarter.
Interest rates on the money market broadly showed downward trends across the yield curve. The 91-day declined to 14.1 per cent in December 2020 from 14.7 per cent last year, and the 182-day Treasury bill rate fell to 14.1 per cent from 15.2 per cent over the same comparative period. On the secondary bond market, yields on 6-year, 7-year, 10-year, and 15-year bonds all declined. The rates on the 20-year bond, however, inched up marginally to 22.3 per cent in December 2020 relative to 22.1 per cent in December 2019.
The weighted average interbank rate declined to 13.6 per cent from 15.2 per cent, reflecting the reduction in the monetary policy rate in March 2020, and improved liquidity conditions on the market. Similarly, average lending rates of banks declined to 21.1 per cent in December 2020 from 23.6 per cent recorded in the corresponding period of 2019, consistent with the monetary policy stance.