Shareholders of banks operating in Ghana are expected to enjoy more returns on their investments as return-on-equity (ROE) grew by 4.2 per cent in February 209 compared to an average of 3.2 per cent in the full year 2018, according to the Summary of Economic and Financial Data by the Bank of Ghana (BoG).
In January 2019, return-on equity however grew by 4.8 percent. This suggests that banks may be making higher profits this year.
On the other hand, return-on-assets (ROA) grew by more than 20 per cent in January and February 2019, registering 21.8 and 20.1 per cent respectively. This is compared with 16.1 and 18.5 per cent growth in November and December 2018 respectively.
According to the January 2019 Banking Sector Report, after-tax ROE and before-tax ROA, very important to shareholders declined marginally in 2018. The slower growth in before and after-tax profit despite the stronger growth in assets and equity in 2018 relative to 2017 contributed to the overall decline in the two profitability indicators.
At the same time, the banks registered a net profit after tax of GH¢2.40 billion in 2018, a growth of 12.5 per cent year-on-year but lower than the 21.7 per cent growth a year earlier.
Cost of borrowing
Despite the reforms in the Ghanaian banking industry, cost of borrowing shot up in January and February 2019 respectively.
It went up by 0.90 per cent from 26.90 per cent in December 2018 to 27.80 per cent in January and February 2019 respectively. But the Ghana reference rate stood at 16.30 per cent.
It is however unclear why average lending rate have shot up despite a reduction in non-performing loans. Average NPLs stood at 18.2 per cent in January 2019, as against 18.4 per cent in February 2019. This excludes loan loss provisioning of 9.4 per cent.
Deposits & liquidity.
On the other hand, average yield on demand deposits, largely current and call accounts grew by 26.3 and 32.9 per cent in January 2019 and February 2019 respectively. This means the banks had sizeable deposits as cheap funds.
Indeed, savings and time deposits grew by 15.3 and 15.4 per cent respectively in January and February 2019.
The report further stated that, foreign currency deposits with banks grew by 25.2 per cent in February 2019 as against 14.3 per cent in December 2018.
It reiterated that currency outside the banking system shot up from 13.7 per cent in January 2019 to 14.1 per cent in February 2019. It has remained relatively low throughout 2018, averaging growth of about 11.0 per cent.
The report also stated that total deposits of the banking industry reached GH¢71 billion in February 2019, from GH¢68.3 billion in December 2018.
Total assets of the banking industry also hit GH¢108.9 billion as against GH¢105.1 billion in December 2018.
Core liquid assets to short term liabilities, a critical component in measuring the stability of a firm dropped from 34.0 per cent in December 2018 to 30.6 per cent in February 2019. This indicates that the banking industry response to paying cash on time dwindled slightly.
Growth of loans and advances also went up from GH¢42.7 billion in December 2018 to GH¢43.5 billion in February 2019.
The banking sector’s capital adequacy ratio also hit 21.7 per cent in February 2019, from 19.3 per cent in December 2018.
According to the January 2019 Banking Sector Report, the banking industry remained adequately liquid to meet its short-term obligations, with core and broad liquidity indicators showing some improvements as at end-December 2018 compared to the same period last year.
The Finder