Bank’s off-balance sheet transactions surge to GHS 19bn; NPLs rise to GHS8bn
Banks in the country the Central Bank notes, have increased their off-balance sheet transactions (comprising largely trade finance and guarantees).
According to the Central Bank, off-balance sheet transactions (contingent liabilities) amounted to GHS 19.1 billion as at end-February 2022, representing a 41.2 percent annual growth, compared to the modest 7.4 percent growth during the same period in 2021.
As a result, banks’ contingent liabilities as a percentage of total liabilities increased to 11.8 percent from 9.2 percent during the review period.
On a year-to-date basis, off-balance sheet transactions have increased by 9.3 percent this year compared with 3.1 percent contraction during the same period last year, reflecting more trade finance-related activities as well as the impact of the depreciation of the Ghana Cedi during the period.
Regarding the industry’s loan asset quality, there was a year-on-year improvement in loan asset quality evidenced by the decline in the NPL ratio, despite the nominal increase in the stock of NPLs to GHS 8.1 billion in February 2022 from GHS 7.3 billion in February 2021.
The decline in the NPL ratio was on the back of a slowdown in the growth of the NPLs stock to 11.2 percent from 15.1 percent, while the stock of loans, which forms the base of the NPL ratio, recorded a higher growth of 18.3 percent from 3.6 percent during the same review period.
When adjusted for the fully provisioned loan loss category, the industry’s adjusted NPL ratio also declined sharply from 6.6 percent to 4.9 percent, one of the lowest ratios the industry has recorded in a long time.
The lower NPL ratio came on the back of a decline in the private sector NPL ratio to 15.3 percent in February 2022 from 16.5 percent in February 2021, while the public sector NPL ratio doubled to 6.4 percent from 3.2 percent during the same reference period.
The sectors that recorded declines in their NPL ratios during the period under review included Services (from 9.2% to 7.5%), Electricity, water and gas (from 25.6% to 13.7%), manufacturing (from 19.0% to 11.1%), and mining and quarrying (from 11.3% to 8.7%).
On the other hand, the sector that recorded the highest increase in its NPL ratio was construction (from 24.4% to 31.5%), followed by agriculture, forestry and fishing (21.0% to 27.8%), then transportation, storage and communication (from 7.3% to 12.4%) and then commerce and finance (from 18.9% to 21.4%).
The sector with the lowest NPL ratio is the services sector, though it is the highest recipient of the industry’s loans, while the construction sector, the third largest recipient of industry loans, has the highest NPL ratio.
The extension of the loan repayment moratoria deadline by the Bank of Ghana to December 31, 2022, is expected to further cushion customers severely impacted by the pandemic and help moderate the adverse impact of the pandemic on banks’ asset quality
