Credit to private sector showed improvement; almost back to pre-pandemic levels – BoG

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Credit to the private sector showed considerable improvement, almost back to pre-pandemic levels and broadly in line with the uptrend in economic activities, Governor of the Bank of Ghana (BoG) Dr Ernest Addison, has said.

He stated that in nominal terms, private sector credit recorded a significant annual growth of 26.5 percent in April 2022, compared with 6.9 percent, in April 2021.

In real terms, however, he said, private sector credit grew by 2.3 percent, due to sustained price pressures, relative to a contraction of 1.5 percent recorded for the same comparative period.

In terms of new advances, the data shows that credit growth continued to improve, reaching GH¢16.4 billion, representing a 56.5 percent year-on-year growth.

Dr Addison, speaking at a press conference by the Monetary Policy Committee (MPC) Monday May 23 said the latest credit conditions survey revealed that banks are however beginning to tighten credit stance on loans to enterprises and households. Despite the tightening of credit conditions, demand for credit by households and firms continue to remain strong.

“The latest confidence surveys conducted in April 2022, showed some easing of sentiments. Consumer confidence dipped on account of increases in fuel prices and transportation costs, as well as rising inflation. Business sentiments also dipped on concerns that price pressures and currency depreciation would adversely impact industry prospects.

“The survey findings were broadly aligned with observed trends in Ghana’s Purchasing Managers’ Index (PMI), which reflected declines in both output and new orders. Developments in the banking sector indicated strong performance, despite the reversal of the COVID-19 regulatory relief measures in March 2022. Total assets rose to GH¢194.3 billion at end-April 2022, which represented 24.8 percent annual growth, relative to 16.4 percent growth in the previous year.

“The growth was underscored by increased deposits and borrowings. Total deposits grew by 21.3 percent to GH¢127.2 billion, while borrowings recorded a strong growth of 66.2 percent to GH¢25.9 billion at end-April 2022.

The key Financial Soundness Indicators remained strong, with the Capital Adequacy Ratio at 21.3 percent, well above the regulatory minimum of 13 percent. Core liquid assets to short-term liabilities improved to 28.2 percent in April 2022, compared with 24.9 percent a year earlier. The Non-Performing Loan ratio eased to 14.3 percent at end-April 2022, compared with 15.5 percent in the previous year, signalling some improvement in asset quality during the year.

“In the first four months of 2022, banks’ profit before tax was GH¢2.9 billion, representing a 26.3 percent growth, compared with 39.6 percent growth for the same period of last year. Net interest income grew by 12.2 percent to GH¢4.6billion, compared to 18.4 percent growth a year ago. Net fees and commissions grew by 17.7 percent to GH¢1.1 billion, compared with 26.5 percent growth last
year, due to decline in trade finance-related activities in the economy.

“Other income increased to GH¢1.0 billion, representing 117.5 percent growth, relative to the contraction by 7.9 percent last year. These developments resulted in a 22.1 percent jump in operating income to GH¢6.7 billion, compared with 16.8 percent growth in the corresponding period of 2021. Operating expenses recorded 23.0 percent growth compared to 1.7 percent growth in the previous
year.”

By Laud Nartey|3news.com|Ghana

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