Survey reveals tightened credit stance on loans to enterprises
The Central Bank has revealed that there is a tightened credit stance on loans to businesses by banks in the country.
The assertion by the Central Bank comes on the back of its latest survey on credit conditions in the country.
Making the disclosure at the 105th Monetary Policy Committee (MPC) meeting on Monday, March 22, Governor of the Central Bank, Dr Ernest Addison, however noted that, despite the prevailing tightened credit conditions, demand for credit by households and small and medium-sized enterprises are projected to increase in the near to medium-term.
According to the Bank of Ghana, credit to the private sector continued to recover, consistent with the rebound in economic activities.
In nominal terms, annual growth in private sector credit increased significantly to 17.1 percent in February 2022 compared with 7.4 percent in the same period of 2021.
In real terms, private sector credit grew by 1.2 percent relative to a contraction of 2.7 percent, over the same comparative period.
The rebound in credit growth continued in the first two months of 2022, with a 70.7 percent increase in new advances to GH¢8.0 billion, compared with 24.6 percent growth in the same period last year.
Borrowings by the private sector within the review period increased significantly by 78.8 percent to GH¢25.5 billion, relative to the contraction of 23.4 percent in the previous year.
Meanwhile, banks’ profitability improved over the first two months of 2022, with profit before tax at GH¢1.3 billion, compared to GH¢1.1 billion in the same period last year.
Net interest income grew by 10.3 percent to GH¢2.2 billion, compared to 10.9 percent a year ago.
Net fees and commissions grew by 11.8 percent to GH¢486.8 million, lower than the growth of 13.7 percent registered during the same period last year.
Other income of the banks stood at GH¢383.2 million, representing 95.5 percent growth, compared with a contraction of 16.5 percent in the same period last year.
These developments resulted in a 16.9 percent growth in operating income to GH¢3.1 billion, compared with a growth of 8.7 percent in the corresponding year.
However, operating expenses went up by 21.3 percent on account of higher administrative costs and emoluments, relative to a contraction of 0.3 percent in the same period last year.
Developments in the banking sector over the first two months of 2022 show continued strong asset growth.
Total assets stood at GH¢187.8 billion in February 2022, representing 23.5 percent annual growth, compared with 18.5 percent growth in the previous year.
The growth in assets was on the back of increased deposits and borrowing. Total deposits recorded a year-on-year growth of 18.2 percent to GH¢123.0 billion.
Trends in the financial soundness indicators remained positive, underpinned by strong solvency, liquidity, and profitability.
The Capital Adequacy Ratio of the Industry was 19.6 percent at end-February 2022, well above the current 11.5 percent regulatory minimum threshold.
Core liquid assets to short-term liabilities was 24.2 percent in February 2022, compared with 26.5 percent in the previous year.
Improvements in asset quality continued into 2022, with the Non-Performing Loans (NPL) ratio declining to 14.4 percent on average, at end-February 2022, compared with the NPL ratio of 15.3 percent in February 2021.
