Banks in the country, according to the Bank of Ghana (BoG), restructured loans worth Ghs 4.65 billion at the end of the first quarter of this year.
The restructured loans executed by banks to cushion customers severely impacted by the pandemic, the Central bank notes in its May 2021 Summary of Economic and Financial Data, represents 9.8 percent of the industry’s total loan portfolio.
Loans are restructured to alter the terms of repayment with the objective of providing the borrower with favourable terms to enable him or her pay back the loan. Some loans are restructured to provide less interest rates and longer repayment period.
Additionally, loan loss provisions increased by 29.4 percent within Q1 2021, compared with the 7.1 percent recorded in loan loss provisions same period last year on account of continued elevated credit risks.
Increased loan loss provisions, the BoG further notes resulted in increment of Non-Performing Loans (NPL) ratio to 15.5 percent in April 2021 arising partly from the general pandemic-induced repayment challenges as well as some bank specific loan recovery challenges.
According to Central Bank, despite some witnessed sluggishness in credit demand conditions due to the pandemic, new advances by banks in Q1 2021 totalled GH¢10.5 billion, compared to GH¢10.9 billion for same period in 2020.
Generally, the banking sector, according to the Central Bank, maintained its resilient performance through to end-April 2021, with strong growth in total assets, deposits and investments.
Total assets increased by 16.4 percent to GH¢155.7 billion reflecting strong growth in investments in government securities by 34.9 percent to GH¢73.3 billion, mainly funded by deposits and loan repayments.
Also, total deposits recorded an annual growth of 24.2 percent to GH¢104.9 billion on the back of the strong liquidity flows from the fiscal stimulus and payments to contractors, and to depositors and clients of defunct SDIs and SEC-licensed fund managers respectively.
Financial soundness indicators the BoG further notes, remained strong, underpinned by improved solvency, liquidity and profitability indicators. The industry’s Capital Adequacy Ratio of 21.8 percent as at end-April 2021 was well above the regulatory minimum threshold of 11.5 percent.
Bank’s net interest income for the period under review also grew by 18.4 percent to GH¢4.1 billion, compared with the 18.8 percent growth over the same comparative period. Net fees and commissions grew stronger by 26.5 percent to GH¢917.6 million, relative to 8.8 percent growth during same period last year, reflecting a gradual recovery in trade finance-related and other ancillary businesses of banks.
Accordingly, operating income rose by 16.8 percent, marginally higher than the corresponding growth rate of 15.2 percent a year ago.
“Overall, the impact of the pandemic on the industry’s performance was moderate, as banks remained liquid, profitable and well-capitalized,” noted the Governor.