The Bank of Ghana says the impact of COVID-19 on the banking industry’s performance was moderate as banks remained liquid, profitable and well-capitalized.

According to the Bank of Ghana’s Monetary Policy Report, the banking sector performance remained strong throughout 2020, with robust growth in total assets, deposits and investments.

Solvency which is the ability of a bank to meet its financial obligations and liquidity indicators remained strong.

At the same time, the banking industry’s Capital Adequacy Ratio of 19.8%, was well above the regulatory minimum threshold, as of December last year. Core liquid assets to short term liabilities were estimated at 27.8% in December 2020 compared with 30.5% a year ago.

Banks earnings outstanding

With regard to earnings, profit before tax increased by 27.2% to GH¢6.1 billion. Though a little below that of 2019, the earnings was appreciable, based on the impact of the coronavirus pandemic.

Net interest income, largely from loans and investments, contributed significantly to the profit, growing by 20.9% to GH¢11.2 billion.

Net fees and commissions grew by 5.0% to GH¢2.3 billion, lower than the growth of 16.5% recorded in the prior year, reflecting the dip in growth of credits and other trade finance-related businesses. Operating income rose by 17.9% whilst operating expenses increased by 8.2%, albeit lower than the respective growth rates of 21.1% and 12.1% in 2019.

GH¢4.47bn loans restructured

On credit, the Central Bank said the implementation of the Covid-19 related regulatory reliefs and policy measures helped supported lending activities.

The 23 banks provided support and reliefs in the form of loan restructuring and suspension of loan repayment to cushion 16,694 customers, severely impacted by the pandemic.

Total outstanding loans restructured by banks as of December 2020 amounted to GH¢4.47 billion, representing some 9.4% of industry loan portfolio.

Non-Performing Loans (NPL) ratio increased from 14.3% in December 2019 to 15.7% in June 2020, arising from the pandemic-induced repayment challenges. But it declined to 14.8% in December 2020 due to loan write-offs and increased credits, particularly during the last quarter.

Balance sheets expanded

Commercial banks’ balance sheets also saw growth during the year due to the expansionary government policy and the increase in deposits mobilized from the Specialized Deposits Taking institutions sector due to a flight to quality from depositors in the SDI sector.

Total deposits increased by 26.8%, and net claims on government by commercial banks increased by 44.6%.

On the other hand, credit extended to the private sector moderated throughout 2020.

On an annual basis, net credit to the private sector slowed to 5.8% in December 2020 compared with 23.8% in the corresponding period in 2019.

On a gross basis, credit to the private sector grew by 10.6% compared with 18.0% over the same comparative period.