Czech - Ghanaian Chamber of Commerce


With the levels of non-performing loans (NPLs) on the rise again this year, the central bank has raised concerns of the quality of loan portfolios in the industry. The NPLs ratio increased to 23.4% in April 2018 from 21.6% in December 2017.

The Governor of the Bank of Ghana (BoG), Dr. Ernest Addison, at the press briefing on the 82nd meeting of the Monetary Policy Committee (MPC), disclosed that “overall, financial soundness indicators of the banking industry measured in terms of earnings, liquidity, and capital adequacy improved moderately but the quality of loan portfolio remains a concern.”

Adjusting for loan loss provision, the NPLs ratio increased to 12.3% in April 2018, from 10.1 percent in December 2017. “We are seeing NPLs edging up partly because of the migration of loans that we previously classified as performing, now moving to become sub-standard and loss.”

The rise in NPLs reflects the migration of some legacy loans to non-performing category.

“The issue of legacy has to do with the sector. Some of them might be energy sector loans that are migrating from current to the NPLs category. Some of it is non-energy sector loans that are also migrating,” Dr. Addison explained.

The BoG’s MPC cut its policy rate by 100bp to 17% at the conclusion of its meeting. This is in line with expectations in the industry and comes against the backdrop of falling inflation and a subdued inflation outlook. Analysts expect, at least, one more policy rate cut of 100 basis points (bp) during the remainder of the year, after the BoG cutting the policy rate by a cumulative 300bp so far this year.

The Bank’s leading indicator of economic activity suggests a slower pace of growth in the first quarter of 2018.

However Dr. Addison indicates there are prospects of a gradual rebound over the medium-term, which is expected to be supported by the favorable external environment and policy initiatives to boost growth.

The business environment is generally favorable due to the relative stability of the cedi, reduction in interest rates and the continued disinflation process, he noted. Although private sector credit growth remained below expectations, Dr. Addison noted that there are emerging signs of recovery evidenced by increased new loan advances and easing credit conditions.

The MPC notes that “the banking sector remains liquid and solvent with evidence of new capital injection as banks strategize to implement recapitalization plans in line with the new minimum capital requirement.”

The total asset base of banks increased to GH¢ 97.8 billion in April 2018 indicating an annual growth of 15.7% compared with the 30.9% growth recorded in April 2017. The asset growth was mainly funded by deposits which went up by 15.7% on a year-on-year basis.

The industry’s average Capital Adequacy Ratio (CAR) improved to 18.2% in April 2018 against 17.4% last year, reflecting efforts by banks to recapitalize.

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