Banks wrote off a little above GH¢1.1 billion in the first two months of this year, according to the Profitability Statement of Banks published by the Bank of Ghana.
The provisioning for bad debt was classified as loan losses, depreciation and others.
It was slightly above the GH¢1.02 billion recorded during the same period last year.
However the growth of the bad loans slowed down considerably, largely because of the suspension of loan repayments and loan restructuring by banks to customers during the covid-19 pandemic.
Some banks gave reliefs of about 6 month’s moratorium, whilst others extended it because of the fine relationship they have with the customers.
In terms of asset quality, the report said the covid-19 pandemic-induced loan repayment challenges and slowdown in credit growth continues to impact the quality of assets within the banking sector.
Although the negative impact on asset quality seemed to have declined slightly in the second-half of 2020, supported by reliefs provided by banks, a marginal deterioration in asset quality was recorded during the first two months of this year.
Accordingly, the Non-Performing Loan ratio of 15.3% at the end of February was marginally higher than the year-end NPL ratio of 14.8% and the previous years’ NPL ratio of 13.8%.
The increase in the NPL ratio over the one year period reflects an actual increase in the stock of deterioration in loan quality by 15.1% to GH¢7.3 billion at the end of February this year.
Banks profit slowdown in 2020
Banks growth in profit-after-tax slowed to 5.9% in the first two months, from 38.8% recorded during the same period last year, the March 2021 Banking Sector Development Report.
This was as a result of a large decline in growth of interest income.
According to the report, interest income growth declined to 9.5% in February 2021, from 22.0% in February 2020 due to the relatively low growth in credits.