Banks’ total assets in 2022 has grown marginally by 22.9% owing largely to the recent macroeconomic developments and government’s Domestic Debt Exchange Programme (DDEP), the Monetary Policy Report of the Bank of Ghana(BoG), released yesterday, Monday, February 20th, 2023 reveals.
According to the Report, total assets continued to increase during the year, 2022, sustained by sturdy growth in deposits. The marked growth recorded was partly driven by the revaluation of foreign currency denominated indicators. Total assets of the banking sector grew by 22.9 percent to GH¢221.0 billion at end-December 2022, compared with 20.4 percent growth recorded in December 2021.
“Foreign assets grew by 42.6 percent in December 2022 from the 13.9 percent contraction in 2021. Domestic assets, however, recorded a lower growth of 21.7 percent in December 2022 compared to the growth of 23.4 percent in December 2021.
“Accordingly, the share of foreign assets in total assets increased from 5.8 percent to 6.7 percent while the share of domestic assets in total assets declined from 94.2 percent to 93.3 percent during the reference period.”BoG’s Monetary Policy Report
It was towards the end of the year, 2022, that the country began to experience severe depreciations in its local currency, thus, the increase in foreign assets to total assets as opposed to domestic assets, mainly attributable to the devaluation of the local currency, the cedi, against all other currencies.
Portfolio rebalancing by banks continued into December 2022, resulting in the contraction of investments. Investments constricted to GH¢79.2 billion by 4.8 percent in December 2022 from a growth of 29.0 percent owing to the announcement of government’s Domestic Debt Exchange Programme (DDEP), that resulted in some adjustments made by banks to their asset portfolios.
Consequently, the share of investments towards December 2022, declined from 46.2 percent to 35.8 percent.
“The decline in investments reflected similar declines in short-term bills and long-term securities with bills contracting by 9.2 percent in December 2022 from a growth of 42.9 percent in December 2021, while securities declined by 3.3 percent at end-December 2022 following a growth of 25.2 percent in the previous year.”BoG’s Monetary Policy Report
Banks’ Credit grows sharply to 30.2% in 2022 from 12.6%
While investments declined, credit growth increased sharply, due in part to the revaluation of foreign currency loans.
The growth in credit as opposed to investments is also because of prices dropping towards December 2022, when the cedi began appreciating. With this period also close to the Yuletide, individuals needed more funds to spend with their families than they needed to save.
“Gross domestic loans and advances recorded an annual growth of 30.2 percent to GH¢70.0 billion at end-December 2022 compared to 12.6 percent growth in December 2021. The increase in credit in 2022 reflected increases in domestic currency loans and the revaluation of foreign currency denominated loans.
“Similarly, net loans and advances (gross loans adjusted for provisions and interest in suspense) recorded 29.2 percent growth in December 2022 to GH¢60.9 billion, compared to 12.8 percent growth in the previous year.”BoG’s Monetary Policy Report
Additionally, the Report revealed that deposits remained the main source of funding for the banking sector, rising from 16.6 percent recorded in December 2021 – increasing by 30.4 percent to GH¢157.9 billion in same period last year, 2022.
“The foreign currency component of deposits increased by 54.4 percent to GH¢44.8 billion in December 2022 compared to a growth of 7.8 percent a year ago, an indication that the deposit growth was partly driven by currency depreciation. Borrowings, on the other hand, declined by 14.1 percent to GH¢18.9 billion in December 2022 compared with 51.9 percent growth recorded in December 2021.”BoG’s Monetary Policy Report
The contraction in borrowings in 2022 reflected sharp declines in short-term and long-term foreign borrowings, from the corresponding growth rates of 54.1 percent and 37.6 percent in the previous year by 50.2 percent and 13.0 percent respectively in December 2022.
“On the domestic front, short term borrowings of GH¢10.1 billion at end-December 2022, remained unchanged between the two periods, after recording an growth of 100.6 percent in December 2021. Long-term domestic borrowing, however, grew strongly by 21.0 percent from a contraction of 44.0 percent during the same reference period.”BoG’s Monetary Policy Report
Generally, the Monetary Policy Report of the Bank of Ghana shows that the banking sector performance in 2022, appears mixed, starting on a strong note and ending with declines in key FSIs, largely attributable to the spillover effects of the adverse macroeconomic developments and the Domestic Debt Exchange Programme.