Banking Survey: FBNBank leads peers with highest liquidity ratio of 131%
Per the 2023 Ghana Banking Survey conducted by PwC, Ghana’s financial landscape witnessed a stark transformation, with notable implications for liquidity levels within the banking sector. First Bank of Nigeria (FBN) Ghana emerged as the epitome of liquidity, boasting a remarkable liquidity to total deposits ratio of 131% in 2022, far surpassing the industry average by an impressive 54%.
This feat was attributed to a strategic shift in FBN’s investment approach, opting for treasury bills over bonds. By consistently maintaining a higher ratio of liquid funds to total deposits over the past five years, FBN has displayed a prudent and conservative strategy, prioritizing liquidity over aggressive loan advancements.
Nevertheless, FBN’s remarkable liquidity performance stood in contrast to the overall industry’s trajectory. Ghanaian banks experienced a significant decline in liquidity, posing concerns among stakeholders and market observers. The liquidity to deposit levels plummeted by 16%, falling from 93% in 2021 to 77% in 2022. This downturn can be traced back to a substantial 40% reduction in the industry’s liquid funds, shrinking from ¢113.5 billion in 2021 to ¢68.4 billion in 2022.
Deposits, on the other hand, surged by an impressive 34%, rising from ¢121.8 billion to ¢163.7 billion during the same period, signifying an increasing demand for banking services. The heightened liquidity crisis resulted from the adverse effects of the Domestic Debt Exchange Programme initiated by the Government of Ghana, inflicting substantial impairment losses across nearly all banks.
Bank of Africa (BOA), along with Access Bank Ghana, Fidelity Bank, First National Bank, Standard Chartered Bank, UBA, Absa, and Zenith Bank Ghana, demonstrated commendable resilience by maintaining liquidity to deposit levels above the industry’s average of 77%. BOA’s position as the leader in this regard was evident, with total liquid assets of ¢2.2 billion in 2022, registering a sustained liquidity level from its ¢2 billion figure in the previous year.
Amid the sector’s liquidity challenges, analysts underscore the criticality of a robust liquidity stance for banks to ensure stability and meet financial obligations. The divergent performances among Ghanaian banks serve as a clarion call for vigilant risk management practices and strategic adaptation to navigate the evolving financial landscape. As the industry seeks to rebound from the liquidity downturn, stakeholders eagerly await the banks’ responses and strategies to restore confidence in Ghana’s banking sector.
