Asare Akuffo, MD, HFC

Even though total assets of the banking industry in Ghana increased by 26.8 per cent year-on-year to end 2011 at GH¢22.6 billion, its Capital Adequacy Ratio (CAR) dropped to 17.4 per cent.

The Bank of Ghana (BoG), which made these known at a press conference in Accra recently, said the industry’s overall liquidity position however increased due to high funding (deposits and capital) as against a slow growth in the credit portfolio. 

Although the decline was above the statutory level of 10 percent, it said in 2010 the capital adequacy ratio of the industry was 19.1 per cent.

According to BoG, the banking system’s growth in assets was funded mainly by deposits, which grew by 35.3 per cent on a year-on-year basis to GH¢16 billion in 2011, compared to a growth of 31.7 per cent in 2010.

It noted that the growth in capital and reserves which amounted to GH¢739 million also supported banking sector balance sheet expansion.

In terms of earnings, the bank said all the indicators (Return On Equity, Return On Assets and Return On Earnings assets) improved in 2011, compared to the 2010 levels.

The non-performing loan ratio declined from 16.1 per cent in 2010 to 14.2 per cent at the end of 2011.

Credit to the private sector credit increased in 2011.  By December 2011, private sector credit had reached GH¢8.6 billion from GH¢6.8 billion in 2010, representing a year-on-year growth of 26.3 per cent. The services and commerce and finance sectors accounted for 74.3 per cent of the total deposit money banks (DMBs) credit allocated in 2011.

The bank’s Credit Conditions Survey, conducted in January 2012, points to a tightening of credit stance by banks for both households and enterprises.

“The tightening of credit stance was more pronounced for Small and Medium-scale Enterprises (SMEs) on account of inadequate cash flow to support repayment, weak financial performance and inadequate security.

“The Bank of Ghana has also this month, conducted stress tests of the banking system. The tests confirm that the banking system is resilient to interest and exchange rate shocks. However, credit and deposit concentration risks remain.”

By Samuel Boadi

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