The growth of gross income in the banking sector has declined from 18.3 percent in August 2019 to 14.4 percent in August 2020.
This translates to a decline of approximately 3.9 percent year-on-year.
This was captured in the recent Banking Sector Report released by the Bank of Ghana.
The Bank of Ghana has intimated that the “growth in net fees and commissions and other income sources for banks also slowed, culminating in a decline in growth of gross income” during the period under review.
Similarly, the Banking Sector Report indicates that asset utilisation marginally declined to 5.0 percent in August 2020from 5.2 percent recorded the previous year over the sameperiod, representing a reduction of about 0.2 percent.
It should be noted that asset utilisation is measured as the ratio of gross income to total assets. This implies that for each asset in use, the income generated was less in August 2020 than August 2019, the Bank of Ghana mentioned.
Again, the Bank of Ghana further asserted that the banking sector’s interest margin to total assets also dropped marginally by 0.2 percent from 5.2 percent in August 2019 to settle at 5.0 percent in August 2020.
Whereas there were declines in interest margin to total assets,the interest margin to gross income ratio edged up to 53.9 percent from 51.9 percent over the period under review, the Bank of Ghana opined.
Detailing the banks’ composition of gross income, the Bank of Ghana says income from investments remained the largest source of banks’ income, hovering around 44.8 percent by the end of August 2020, unchanged from the previous year’s share. Interest income from loans came in next as the second largest source of banks’ income, increasing from 34.5 percentrecorded in August 2019 and inching up to 34.8 percent this year, indicating a marginal upsurge of 0.3 percent yearly.
In the same vein, the share of other income increased marginally from 8.6 percent last year August to 8.8 percentthis year, translating into a growth of 0.2 percent year-on-year, the Bank of Ghana continued.
The portion of banks’ income from fees and commissions,however, came last declining by 0.6 percent to settle at 11.5 percent in August 2020 from 12.1 percent recorded in August 2019. This is commensurate with the decline in the growth of gross income within the review period, the Bank of Ghana added.
Overall, though the banking industry’s profitability ratio improved marginally to 20.8 percent in August 2020 from 19.5 percent a year earlier, the Bank of Ghana cautioned that “the ratio of operational cost to gross income on the other increased marginally to 53.5 percent from 53.0 percent between the two periods, on account of the slower growth in gross income in August 2020”.
This could be as a result of an increase in operational risk from the rise in the number of fraud cases reported in the banking industry in the period under review.
“Bank of Ghana’s issuance of the Cyber and Information Security Directive and the Corporate Governance Directive is expected to boost confidence in the financial system by reducing operational fraud within the banking industry”.
