Commercial banks’ balance sheets saw growth in 2020 – BoG

Dr. Ernest Addison is the Governor of the Bank of Ghana
Governor of the Bank of Ghana (BoG) Dr Ernest Addison has said commercial banks’ balance sheets saw growth during the year due to the expansionary government policy and the increase in deposits mobilised from the Specialised Deposit-taking Institutions (SDI) sector due to a flight to quality from depositors in the SDI sector.

He stated that total deposits increased by 26.8 percent, and net claims on government by commercial banks increased by 44.6 percent. On the other hand, he said, credit extended to the private sector moderated throughout 2020.

On an annual basis, net credit to the private sector slowed to 5.8 percent in December 2020 compared with 23.8 percent in the corresponding period in 2019.

On a gross basis, credit to the private sector grew by 10.6 percent compared with 18.0 percent over the same comparative period.

He said these in a statement on Monday February 1, while announcing that the central bank has kept the policy rate at 14.5 per cent.

“Interest rates on the money market broadly showed downward trends across the yield curve. The 91-day declined to 14.1 percent in December 2020 from 14.7 percent last year, and the 182-day Treasury bill rate fell to 14.1 percent from 15.2 percent over the same comparative period.

“On the secondary bond market, yields on 6-year, 7-year, 10-year, and 15-year bonds all declined. The rates on the 20-year bond, however, inched up marginally to 22.3 percent in December 2020 relative to 22.1 percent in December 2019,” he said.

He added “The weighted average interbank rate declined to 13.6 percent from 15.2 percent, reflecting the reduction in the monetary policy rate in March 2020, and improved liquidity conditions on the market. Similarly, average lending rates of banks declined to 21.1 percent in December 2020 from 23.6 percent recorded in the corresponding period of 2019, consistent with the monetary policy stance.

READ ALSO:  No dividends, as banks struggle to raise GH¢400m

“The banking sector showed resilience to the first wave of the pandemic supported by strong policy support and regulatory reliefs. Banking sector performance remained strong through end 2020, with robust growth in total assets, deposits and investments.

“Overall, the impact of COVID-19 on the industry’s performance was moderate as banks remained liquid, profitable and well-capitalized. Total assets increased by 15.8 percent, of which Investments in Government bonds rose by 33.4 percent.

“Solvency and liquidity indicators remained strong. The industry’s CAR of 19.8 percent as at end December 2020 was also well above the regulatory minimum threshold. Core liquid assets to short term liabilities were estimated at 27.8 percent in December 2020 compared with 30.5 percent a year ago. Net interest income grew by 20.9 percent to GH¢11.2 billion compared to 24.9 percent a year ago.

“Net fees and commissions grew by 5.0 percent to GH¢2.3 billion, lower than the growth of 16.5 percent recorded in the prior year, reflecting the dip in growth of credits and other trade finance-related businesses. Operating income rose by 17.9 percent whilst operating expenses rose by 8.2 percent, albeit lower than the respective growth rates of 21.1 percent and 12.1 percent in 2019.

“Loan loss provisions grew by 28.0 percent, higher than the 23.6 percent a year ago reflecting elevated credit risks in 2020. Profit before tax increased by 27.2 percent to GH¢6.1 billion compared to 34.7 percent a year ago.”

By Laud Nartey||Ghana