THE banking industry wrote off about GH¢1.0 billion as bad debts in the first eight months of 2019.
According to the September 2019 banking Sector Report, the total provision made was as a result of loan losses, depreciation and others.
It noted however that the industry’s asset quality improved significantly during the period under review.
The stock of the industry’s Non-Performing Loans (NPLs) contracted by 4.2 per cent to GH¢6.91 billion in August 2019 from GH¢7.21 billion in August 2018.
The decline in the stock of NPLs coupled with the recovery in credit growth translated into a lower NPL ratio of 17.8 percent in August 2019 from 21.3 percent in August 2018.
When adjusted for the fully provisioned loan loss category, the NPL ratio declined to 8.9 percent from 11.7 percent, signaling a slowdown in deterioration of loan quality and an indication that continued implementation of the loan write off policy and intensified loan recovery efforts will help address the incidence of high NPLs in the industry.
The private sector accounted for 97.6 per cent of the industry’s NPLs in August 2019, up from the 94.4 per cent recorded in August 2018, while the public sector’s contribution declined to 2.4 per cent from 5.6 per cent over the same comparative period.
Indigenous private enterprises accounted for 73.7 per cent of total NPLs in August 2019, slightly below the 74.6 per cent share recorded in the same period in 2018, while the contribution of foreign enterprises declined to 8.5 per cent from 10.3 per cent.
The share of households in industry NPLs increased from 8.8 per cent to 10.9 per cent during the period under review, partly due to their increasing share of industry credit.
The report added that NPL sector analysis shows that the two largest recipients of credit, the commerce and finance sector and the services sector, also accounted for the largest proportions of NPLs in the banking industry in August 2019. Together, their NPLs represented 43.1 per cent of total industry adversely classified loans, 23.7 per cent of which was attributed to the commerce and finance sector.
The electricity, gas and water sector with a relatively lower share of credit of 8.8 per cent compared to the Manufacturing sector (11.9 per cent) accounted for a higher share of non-performing loans of 15.6 per cent, higher than the manufacturing sector’s share of 13.9 per cent.
The Agriculture, Forestry and Fishing sector accounted for 8.1 per cent of total NPLs while the Mining and Quarrying sector accounted for the least share of industry NPLs of 2.1 per cent, in line with its least credit share of 3.8 per cent as at end-August 2019. With the exception of the services sector, improvements were recorded in the quality of loans to all sectors in August 2019 compared to August 2018.
The electricity, water and gas sector had the highest proportion of loans impaired of 31.5 per cent in August 2019, although this was a significant improvement over the August 2018 position of 43.9 per cent.
The Agricultural, Forestry and Fishing sector’s NPL ratio, the second highest in the industry, similarly improved from 38.8 per cent to 32.7 per cent over the review period.
The NPL ratio for the Services sector on the other hand, went up from 14.8 per cent to 15.4 per cent between August 2018 and August 2019.
The mining and quarrying sector recorded the lowest sectoral NPL ratio of 9.7 per cent as at end August 2019, an improvement from the NPL ratio of 14.2 per cent recorded a year earlier.
Banks registers GH¢2.24bn profit Q3
Meanwhile, the banking industry recorded an after-tax profit of GH¢2.24 billion post banking reforms, a 38.4 per cent growth over profits recorded for the same period last year.
According to the September 2019 Banking Sector Report, the strong profit performance was underpinned by higher growth in net interest income of 26.3 per cent in August 2019 after recording a marginal contraction in August 2018, as well as modest growth in fees and commissions (12.0 per cent in August 2019 compared to 14.6 per cent in August 2018).
(By Augustine Amoah)