Operating expenses of Ghanaian Banks increased sharply by 24.3 percent in August 2022, compared to 9.0 percent growth in August 2021.

According to the Bank of Ghana, this is partly reflecting the impact of inflation on banks’ operations.

Despite the rising operating expenses, the banking sector performance remained resilient as at End-August 2022.

Recent industry data from the Bank of Ghana indicated that total assets increased by 22.9 percent on year-on-year basis to GH¢204.6 billion in August 2022 due to sustained growth in deposits, compared to a 16.7 percent annual growth in the previous year.

Total deposits increased by 22.5 percent to GH¢136.7 billion, relative to 21.8 percent growth in August 2021. The key Financial Soundness Indicators (FSIs) of the banking industry have remained positive in the year, with Capital Adequacy Ratio at 18.1 percent, well above the regulatory minimum of 13.0 percent.

“The sector was also liquid, reflected by an increase in the core liquid assets to short-term liabilities to 31.1 percent in August 2022 from 24.7 percent in the previous year. Asset quality also improved as the Non-Performing Loans ratio declined to 14.3 percent at End-August 2022, from 17.3 percent in August 2021, reflecting partly, the higher level of outstanding loans.”
Bank of Ghana

Growth of Profit before tax slows

Profit before tax for banks stood at GH¢6.1 billion in August 2022, representing an annual growth of 25.2 percent, compared to 27.4 percent in the previous year.

‘Other income’ of banks grew by 85.6 percent to GH¢2.0 billion in August 2022, compared with a contraction of 5.4 percent a year ago. These developments resulted in a 25.5 percent growth in operating income to GH¢14.2 billion, relative to a growth of 15.7 percent in the previous year.

Additionally, net interest income grew by 17.3 percent, compared to 17.9 percent. Net fees and commissions also increased by 26.9 percent to GH¢2.3 billion, compared with 21.8 percent growth in the previous year, reflecting the rebound in credit growth as well as an increase in trade finance-related business.

The latest credit conditions survey conducted in August 2022 indicated an overall net tightening of credit stance to corporates and households by the commercial banks. According to the Bank of Ghana, this was reflected in the steady increase in average lending rates.

Rise in new advances

This notwithstanding, new advances increased by 56.1 percent year-on-year to GH¢33.8 billion in August 2022, relative to a 4.9 percent increase in August 2021.

Annual growth in private sector credit was 35.8 percent in August 2022, compared with 9.6 percent a year ago. In real terms, private sector credit increased, albeit marginally, to 1.4 percent due to sustained price pressures. This compares with a contraction of 0.2 percent over the same period in 2021.

Results from the Bank’s August 2022 confidence surveys showed further softening of Business and Consumer sentiments. While consumer confidence dipped on account of rising inflation, business sentiments softened on the back of concerns about price pressures, currency depreciation, and weakening consumer demand.

The survey findings were broadly in line with an observed downturn in Ghana’s Purchasing Managers’ Index (PMI) in August 2022, the BoG noted.

Meanwhile, reserve money for the period under review, increased at a slower pace relative to a year ago. Annual growth in reserve money was 33.1 percent in August 2022, compared with 36.1 percent in August 2021.

Broad money supply (M2+) increased marginally due to a sharp fall in Net Foreign Assets which moderated the expansion in the Net Domestic Assets (NDA) of the depository corporations sector. M2+ grew by 23.4 percent year-on-year in August 2022, compared with 20.2 percent in the same period of 2021.