Banks operating in the country registered a growth of -1.0 per cent in the first quarter of 2016, according to the latest Financial Stability Report by the Bank of Ghana (BoG).
This is compared with a growth of 31.8 per cent in March 2015. They also recorded a negative growth in their bottom line at the end of last year.
According to the report, the industry’s net profit after tax also contracted by 2.6 percent in March 2016 compared with 24 percent growth in March 2015.
Still on profitability, the banking industry showed some deterioration in its earnings performance for the period ended March 2016.
The industry’s net interest income registered a growth of 14.8 per cent in March 2016 compared with 37.3 per cent growth registered in March 2015.
Similarly, the industry’s return on assets (ROA) decreased to 5 per cent in March 2016 from 6.3 per cent in March 2015.
Likewise, after-tax return on equity (ROE) decreased from 29.3 per cent to 23.5 per cent over the same period.
With regard to composition of banks’ income, interest income from loans continued to be the main source of income for the banking industry. In March 2016, interest income constituted 49.8 per cent of total income compared with 48 per cent in March 2015.
The share of investment income in banks’ total income declined marginally from 32.6 per cent in March 2015 to 32.3 percent in March 2016. The share of income from fees and commission however remained unchanged at 11.4 per cent in March 2016 compared with a year earlier.
On operational efficiency, indicators of banking industry operational efficiency showed some deterioration in the first quarter of 2016 compared with same period in 2015. Cost to income ratio increased to 83 per cent in March 2016 as against 78.3 per cent in March 2015 while cost to total assets ratio also increased to 4 per cent in March 2016.
Similarly, operational cost to total assets increased to 2.4 per cent from 2.2 per cent over the same comparative period. The improvement in the country’s energy supply partly contributed to a decline in banks’ operational cost to gross income since the cost of procuring alternative power sources such as generators or plants has been somehow minimized.
The report further stated that total assets of the banking sector grew by 17.2 per cent to GH¢64.56 billion as at end March 2016, up from GH¢55.09billion, 37.8 per cent growth in March 2015. The slower growth in total assets also reflected in its components, with banks generally cutting back on credit.
At end March 2016, net loans and advances of GH¢26.77 billion represented an annual growth of 7.8 percent compared with the 41.2 percent growth in the corresponding period of last year.
The banks’ minimum paid up capital increased by 17.7 per cent in March 2016, about 12.8 percent in March 2015 to reach GH¢3.2 billion. This was mainly due to the entry of two new banks and the injection of new capital by some banks.
On non-performing loans, credit to the private sector contributed 94 per cent of the total banking sector’s non-performing loans as at March 2016, slightly down from 96.8 percent in March 2015.
However, the proportion of banks’ NPLs attributable to the public sector increased from 3.2 percent in March 2015 to 6.0 percent in March 2016.
Meanwhile, the BoG says the overall performance of the banking sector in the first quarter of 2016 showed that the sector continued to be robust with financial soundness indicators, measured in terms of earnings, portfolio quality, liquidity, and capital adequacy well above prudential and statutory requirements.
However, it said the key risk facing the banking sector is the deteriorating asset quality as evidenced by the almost 60 percent increase in banks’ non-performance loans between March 2015 and March 2016.
Source: The Finder