According to the Bank of Ghana’s Monetary Policy Report for July 2024, the banking sector demonstrated strong performance in the first half of the year, driven by consistent increases in deposits and other sources of funding.
The sector’s financial health indicators remained robust, reflecting improved solvency, liquidity, and profitability. However, there was a rise in the Non-Performing Loans (NPL) ratio, attributed to a higher NPL stock and a slowdown in credit growth.
The report highlights that the total assets of the banking sector surged by 33.3 percent, reaching GH¢323.2 billion as of June 2024. This compares to a 21.2 percent growth recorded in June 2023.
The higher growth in assets was driven by a robust growth in deposits, as well as the depreciation of the Ghana cedi. Foreign assets grew by 57.6 percent in June 2024, compared to 74.5 percent in June 2023, while domestic assets grew by 31.0 percent in June 2024, up from 17.8 percent growth same period last year.
The share of foreign assets in total assets increased to 10.2 percent from 8.6 percent, while the share of domestic assets declined to 89.8 percent from 91.4 percent in June 2023. Investments grew by 19.2 percent to GH¢107.2 billion in June 2024, up from a growth of 11.0 percent in June 2023, due to a significant growth in both short-term and long-term instruments. The growth in investments reflected a 7.3
percent growth in short-term bills, from a growth of 149.6 percent in June 2023, while long-term investments (securities) also grew by 28.6 percent in June 2024, having contracted by 23.2 percent in June 2023. The mixed growth in both bills and securities investments culminated in a reduced share of investments in total assets to 33.2 percent in June 2024, from 37.1 percent in June 2023.
“Gross loans and advances rose by 15.6 percent to GH¢84.5 billion in June 2024, relative to a 15.4 percent growth in June 2023. Growth in net loans and advances (gross loans adjusted for provisions and interest in suspense) also moderated to 10.3 percent, from 11.3 percent during the same period last year,” the report said.
The increase in total assets for the banking sector was primarily supported by rises in deposits and other funding sources. Deposits continued to be the dominant funding source, representing 76.1 percent of total assets in June 2024, slightly down from 77.4 percent the previous year. Deposits grew by 31.1 percent to GH¢245.9 billion in June 2024, a slower pace compared to the 42.8 percent growth reported in June 2023.
Foreign currency deposits increased by 29.8 percent to GH¢81.2 billion in June 2024, showing a decrease from the 62.5 percent growth recorded in June 2023. This slowdown suggests that currency depreciation might have impacted the overall deposit growth. Additionally, borrowings saw a significant rise of 44.4 percent to GH¢23.2 billion, reversing the 39.1 percent contraction experienced in the previous year.
The increase in borrowings was driven by a rise in both short-term foreign and domestic borrowings, although long-term borrowings in both categories saw a decline. Short-term domestic borrowings surged to GH¢15.2 billion by the end of June 2024, reflecting a notable 83.0 percent increase, reversing the 33.6 percent decrease reported in June 2023. In contrast, long-term domestic borrowings fell by 17.6 percent, a significant shift from the 45.1 percent growth observed in the same period the previous year.
On the international front, short-term foreign borrowings rose by 33.2 percent, bouncing back from a sharp 75.7 percent drop in June 2023. Meanwhile, long-term foreign borrowings decreased by 2.5 percent, a smaller contraction compared to the 16.2 percent decline recorded in June 2023.
SOURCE: https://dew360.net
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