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Banking

Bank earning to slow down

Banks earnings are expected to slow down in the third and last quarter of this year, Ecobank Research analysis stipulates.

In the second quarter of 2014, profit for the top six listed banks including Ecobank, GCB and Stanchart  rose by 5 percent quarter-on-quarter.

However, the report says the weak second quarter growth quantum in net earnings points to further weakening in 2015 on account of rising balance sheet funding costs and elevated provisioning.

“As Ghana’s economy remains weak, overall bank lending is likely to tighten in the last three months of 2014 on account of high lending rates and rising obligor risks.

“Industry gross non-performing loans (NPLs) rose by 34 percent at the close of May 2014, while second quarter credit loss expenses for the top six listed banks rose by 2 percent,” the report stated.

As a result, the report said it expect banks’ risk appetite to remain low. “We expect supply as well as demand for consumer lending products to remain weak in the last quarter of 2014.”

At the same time, banks’ appetite for lending products linked to government payments is also expected to remain weak.

This will have a great potential to weaken the growth momentum in banks’ earnings especially in the first half of 2015 when the lag begins dissipating.

Banks profit for the first five months of this year inched up despite the harsh economic conditions facing the country, the Financial Stability Report released by the Bank of Ghana revealed.

According to the report, the banking industry’s net profit after tax grew by 51.1 percent in May 2014 compared with 48.8 percent in May 2013.

However, industry net interest income registered a growth of 41.5 percent in May 2014 compared with 57.7 percent growth in May 2013.

 

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DISCLAIMER: The Views, Comments, Opinions, Contributions and Statements made by Readers and Contributors on this platform do not necessarily represent the views or policy of Multimedia Group Limited.