In recognition of the adverse impacts of the coronavirus pandemic on businesses, banks in the country have collectively decided to restructure loans totaling Ghs 6 billion made to businesses hardest hit by the pandemic.
Making the disclosure in an interview, Chief Executive Officer (CEO) of the Ghana Association of Bankers (GAB), John Awuah, noted the decision by the banks is critical to enhancing the resilience and recovery of the economy from the pandemic.
“Our member banks have a good grasp of their role in championing Ghana’s COVID-19 and post-COVID-19 sustainability. What we have done during this pandemic is to ensure that customers – those whose industry or sectors have been impacted significantly – have a breathing space, particularly for those who have facilities or have taken loans with our member banks,” Mr Awuah said.
“What we did at the height of the pandemic last year was come together as an industry and decide to walk with our clients. We have reduced our lending rates from between 150 basis points to 350 basis points,” he added.
The loan restructuring by the banks, involve giving businesses from a wide array of sectors repayment holidays or extensions to enable them to accommodate their current COVID-19 cashflow situation.
The ability of banks in the country to restructure loans made to businesses giving repayment holidays or extensions, indicate the resilience of the banks even during this Covid-19 era.
The Central Bank has on numerous occasions dismissed concerns that the banking sector will not be strong enough to weather expected shocks from a second wave of the Covid-19 pandemic in the country, stating all ratios used in measuring the performance of banks are all pointing in the right direction.
“So if you talk about liquidity which is one key measure of bank performance and across other measures such as asset quality, profitability, and other ratios, the banks are indeed much stronger than they were before the clean up. The banks in the country are now able to pay off their liabilities as and when they fall due,” said Second Deputy Governor Elsie Awadzi-Addo during the University of Professional Studies, Accra (UPSA) Quarterly Banking Roundtable discussion held virtually on January 27.
Meanwhile, asset quality – loan quality – of banks in the country fell marginally by 0.5 per cent as Non-Performing Loans (NPLs) of banks slightly increased from 14.3 per cent end-2019 to 14.8 per cent end-2020.
According to the Bank of Ghana’s (BoG) January 2021 Summary of Economic and Financial Data, the loss category of banks’ NPLs stood at 7.3 per cent in 2019 and 8.3 per cent in 2020 representing a marginal increase of 1 per cent for the period under review.
The slight worsening of the asset quality of banks in the country for 2020 is due to the deferment of repayment of loans by businesses with regards to the moratoria given on loans following the outbreak of the Covid-19 pandemic in the country.
Hence, the true asset quality of banks in the country will be determined when businesses begin repayment of loans. NPLs due to the adverse impact of the pandemic on businesses is expected to be on the high side as most businesses will struggle to pay back loans taken.
However, earnings and profitability of banks for the period under review, increased marginally. Returns on assets and equities increased from 4.2 per cent to 4.4 per cent and 19.9 per cent to 21.4 per cent in 2019 and 2020 respectively.
Banks’ total deposits also increased from Ghs 83.5 billion to Ghs 103.8 billion for the period under review, a 2.2 percentage points increment.
Banks’ total assets for the period between end-December 2019 and end-December 2020 also increased from Ghs 129 billion to Ghs 149.3 billion recording an increment of Ghs 20.3 billion.
