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 Ghanaian banks for 2020 is not surprising as repayments of loans by businesses have been deferred with regards to the moratoriums 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.
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.
