Credit to the private sector is gradually recovering to pre-pandemic levels, reflecting commercial banks’ portfolio rebalancing.

In year-on-year terms, private sector credit increased significantly by 33.7 percent in June 2022, compared with 6.8 percent in the same period of 2021, according to data from the Bank of Ghana (BoG).

In spite of the sustained price pressures, private sector credit, in real terms, recorded a 3.0 percent growth in June 2022 compared to a contraction of 0.97 percent recorded the same period of 2021.

“The latest credit conditions survey of banks revealed tightened credit stance on loans to enterprises and households. Notwithstanding these tight credit conditions across the industry, banks’ credit extension improved during the review period.
“New advances to the economy broadened across the industry, with 20 out of 23 banks extending new credit. Total new advances as of June 2022 was GH¢24.6 billion (54.0 percent year-on-year growth), compared to GH¢15.9 billion (1.0 percent growth) recorded for the same period of 2021”.
Bank of Ghana

Results from the BoG’s latest confidence surveys conducted in June 2022 showed significant softening of business and consumer sentiments. While consumers felt less optimistic about future economic conditions, businesses were concerned about the impact of high cost of raw materials, rising labour costs, exchange rate volatility, and weak consumer demand.

These conditions, according to BoG, adversely impacted business optimism and prospects. At the same time, the Purchasing Managers’ Index (PMI), which provides information on inventory accumulation and new orders at the firm level, also declined.

Robust growth in banking sector’s assets and deposits

Assessment of the banking sector’s performance for the first half of 2022 showed robust growth in assets and deposits. Total assets grew by 22.8 percent on a year-on-year basis to GH¢200.0 billion at End-June 2022, compared to the growth of 17.2 percent in the previous year.

Total deposits grew at a slower pace by 19.1 percent to GH¢131.3 billion, relative to 22.5 percent growth a year earlier.

Additionally, Key Financial Soundness Indicators of the banking industry remained positive. The Capital Adequacy Ratio was 19.4 percent in June 2022, well above the regulatory minimum of 13.0 percent. Core liquid assets to short-term liabilities improved to 30.2 percent, compared with 27.5 percent in the previous year.

The non-performing loans ratio also improved to 14.1 percent at End-June 2022 compared with 17.0 percent in June 2021. According to BoG, this was a reflection of some moderation in the growth of the stock of non-performing loans, as well as the rebound in credit growth.

The banking sector’s profit before tax was GH¢4.4 billion, representing 21.6 percent annual growth in June 2022, compared to 32.1 percent in the previous year. Net interest income grew at 12.4 percent, compared with 19.4 percent a year ago.

Net fees and commissions however, grew by 29.2 percent compared to 19.6 percent in the previous year, reflecting a rebound in trade finance-related business, BoG explained.

These developments culminated in a 23.0 percent growth in operating income, compared with a growth of 15.7 percent in the corresponding year. Operating expenses also recorded a higher growth of 22.9 percent, compared to 7.3 percent in the previous year, moderating the growth in profit before tax during the first half of 2022.