The banking industry boosted its assets by 39.7% to GH¢44.2billion as at July this year despite challenges in the economy which have seen inflation reach a four-year record high and the cedi plummeting the fastest in a decade, Bank of Ghana data has shown.

According to the report of the 61st Monetary Policy Committee (MPC) of the Bank of Ghana, the industry continued to experience “steady growth in both nominal and real terms, evidenced by trends in total assets as well as branch expansion across the industry”.

The local currency has for the first eight months of the year depreciated by 29.8 percent against the dollar on the interbank market, compared to 3.9 percent in the same period last year.

Inflation, which began the year at 13.5 percent, has climbed steadily to reach a four-year record of 15.9 percent as at August.
Impressive growth

The report further stated that “non-performing loans (NPL) ratio adjusted for fully provisioned loans, increased marginally from 5.3 percent in July 2013 to 5.4 percent in July 2014. However, the unadjusted NPL ratio declined from 12.9 percent to 12.3 percent in the same comparative period.

“The capital adequacy ratio for the banking industry declined to 16.2 percent compared to 18.6 percent in the corresponding period last year, but remained well above the regulatory threshold of 10 percent,” the report said.

The performance was also against the backdrop of a high interest-rate environment, fuelled by the large fiscal deficit, inflation and high yields on government bills. Most banks grew their loans and advances while at the same time investing heavily in lucrative government securities that were paying an average annual risk-free interest of 22 percent.

Interest rates have generally trended up on the money market between December 2013 and August 2014. The rate on the 91-day instrument increased to 25 percent from 19.2 percent. Similarly, that on the 182-day instrument increased to 26.4 percent from 18.7 percent.

The rate on the 1-year note rose to 22.5 percent from 17 percent, and the rate on the 2-year increased to 23 percent from 16.8 percent.

The report also stated that bank advances to the private sector grew by 46.2 percent in July, which surpasses the 28.1 percent within the same period last year.”

Despite the increase of 26.8 percent in real credit growth within the second-half of the year, BoG’s business confidence index on the other hand indicated continued softening in sentiments. The index dipped from 82.8 in March to 78.6 in June 2014.

Among the perceptions cited were: low prospects for improved capital outlay, sales and revenues, negative sentiments on industrial growth and heightened inflation expectations.