BoG Governor affirms limited impact of second round DDEP on banks
In a recent statement, Dr. Ernest Addison, Governor of the Bank of Ghana, reassured stakeholders that the upcoming second round of the Domestic Debt Exchange Programme (DDEP) is unlikely to significantly affect the fortunes of the nation’s banks.
The programme, initiated by the government to restructure domestic dollar bonds and cocoa bills, has been a subject of concern amid fears that it might impede the impressive recovery posted by banks, with half-year profits reaching over ¢5 billion.
Addressing journalists after the Monetary Policy Committee Meeting of the Bank of Ghana, Dr. Addison firmly asserted that the performance of banks would be resilient and sustainable despite the looming DDEP.
He referenced data submitted by banks for the first half of 2023, which indicated some lingering effects of the initial DDEP. Nevertheless, the banking sector exhibited robust signs of recovery, bouncing back from substantial losses incurred at the end of 2022 primarily due to impairments of holdings in Government of Ghana (GoG) bonds.
According to recent figures, the total assets of the banking industry stood at ¢242.4 billion as of June 2023, marking a moderated growth rate of 21.2 percent compared to the 22.8 percent recorded in June 2022.
Impressively, total deposits surged by a noteworthy 42.8 percent, reaching ¢187.6 billion in June 2023, compared to ¢131.3 billion in the same period last year, reflecting a 19.1 percent growth rate. However, total borrowings experienced a decline of 39.1 percent, shrinking to GH¢16.0 billion relative to ¢26.4 billion recorded a year earlier.
The banking industry’s investment portfolio witnessed a sharp upswing, driven by considerable growth in deposits. Total investments soared to ¢89.9 billion in June 2023 from ¢81.0 billion in June 2022. Notably, short-term investments posted a remarkable 149.6 percent surge, reaching ¢39.9 billion, up from ¢15.9 billion in the previous year.
Conversely, medium-to-long term investments experienced a dip to GH¢50.1 billion from ¢65.0 billion, primarily attributed to portfolio rebalancing in the wake of the initial DDEP.
Undeniably, the banking sector’s profitability demonstrated significant improvement in the first half of 2023. Notable increments were observed in net interest income, which scaled up by an impressive 41.4 percent to ¢9.9 billion, surpassing the 12.4 percent growth recorded in the corresponding period the preceding year.
Similarly, net fees and commissions displayed a commendable surge of 30.6 percent, aggregating to ¢2.2 billion compared to 27.0 percent during the same period in the previous year. Consequently, operating income recorded a sharp ascent of 46.1 percent, surpassing the 22.6 percent growth achieved during the analogous period of the previous year.
In light of Dr. Addison’s unwavering assurances, market participants remain cautiously optimistic about the impact of the second round of DDEP on the nation’s banks. As the financial landscape continues to evolve, vigilance and adaptability shall remain the watchwords for both policymakers and financial institutions.
