Banking Sector: Off Balance Sheet transactions rise to GHS 20.1bn
The Central Bank in its May 2022 Monetary Policy Report, asserts banks in the country have increased their off-balance sheet transactions which comprise mainly trade finance and guarantees.
The increase in off-balance sheet transactions by banks, the Central Bank notes, was in response to the rebound in economic activity and the corresponding increase in trade finance related activities.
In the said report, the apex bank notes off-balance sheet transactions (contingent liabilities) rose to GHS 20.1 billion as at end-April 2022, representing a 41.9 percent annual growth, compared to a growth of 26.7 during the same period in 2021.
As a result, banks’ contingent liabilities as a percentage of total liabilities increased to 12.0 percent from 10.5 percent during the review period – April 2021 to April 2022.
The industry’s liabilities of which deposits constitute the largest share (65.5%) at end-April 2022, moderated from 67.3 percent in April 2021 on account of the slowdown in the growth of deposits during the period.
The share of borrowings, on the other hand, increased to 13.3 percent from 10.0 percent, reflecting the sharp increase in the industry’s borrowing during the reference period.
Also, the share of shareholders’ funds increased from 7.5 percent in April 2021 to 7.6 percent in April 2022 while the share of other liabilities declined from 15.2 percent to 13.7 percent over the same comparative period.
Regarding the industry’s loan asset quality, asset quality improved (year-on-year), evidenced by the decline in the NPL ratio from 15.5 percent in April 2021 to 14.3 percent in April 2022.
When adjusted for the fully provisioned loan loss category, the industry’s adjusted NPL ratio also declined sharply from 6.5 percent to 4.2 percent. The decline in the NPL ratio was on the back of a higher growth in the stock of loans from 7.0 percent to 25.8 percent during the review period.
The stock of NPLs, on the other hand, increased to GHS 8.6 billion in April 2022 from GHS 7.4 billion in April 2021, representing a growth of 15.8 percent (comparative
growth of 11.1% in April 2021).
The increase in the NPL stock indicates that some asset quality risks still remain within the banking sector.
Meanwhile, the extension of the loan repayment moratoria deadline by the Bank of Ghana to December 31, 2022 is expected to provide relief to customers adversely impacted by the pandemic and help moderate the growth in non-performing loans within the banking sector.
