Banks Struggle To Mobilise Deposits

The latest Economic and Financial Data published by the Bank of Ghana (BoG) suggest that banks in the country are struggling to mobilize cheap funds.

According to the report, Savings and Time Deposits popularly called fixed deposits recorded a decline of 24.0 percent in March 2016 compared with 32.6 per cent growth in January 2016.  

This is as a result of the poor economic environment underpinned by tightness in monetary policy of the BoG with the attendant adverse effect on liquidity in the banking sector.

Demand deposits, largely current and savings accounts declined from 31 percent at the end of January 2016 to 21.5 percent in February and 21.2 percent in March respectively.

Growth of currency outside banks (monies not sent to banks) also declined from 23.3 per cent at the end of last year to 20.5 per cent in January 2016 and subsequently to 15.2 percent in March 2016.

The banking sector’s capital adequacy ratio also stood at 17.6 percent in March compared with 18.1 and 17.9 percent respectively in January and February 2016.

Non-performing loans stood at 16.2 percent at the end of quarter one of 2016, higher than the 15.6 per cent at the end of February 2016.

The report further stated that total assets of the banking industry increased marginally to GH¢64.6 billion at the end of March 2016 from GH¢62.7 billion in February 2016 and GH¢63.1 billion in January 2016.

Loans and advances however remained unchanged in January, February and March 2016 at GH¢30.2 billion.

According to the report, liquidity in the banking sector reduced to 18.1 percent at the end of March 2016 as against 29.6 percent in the first month of this year and 19.3 percent in February 2016. 

Banking experts have described current monetary policy rate of 26 per cent as unduly high and responsible for the woes of players in the industry.

For instance, about GH¢300 million which should have been depositsat the end of February 2016 was lost to the sector.

Mixed performance characterized the Ghanaian banking sector performance in the first three months of 2016 though it was quite better than the 2015 performance.

The relative stability of the Ghana cedi and the significant reduction in the power outage contributed largely to some improvement in their indicators.

As expected banks such as Ecobank, CAL, GCB, uniBank and Stanchart posted some strong growth for quarter one 2016. However, their non-performing loans were worrying to the sector.

The Bank of Ghana said in its Financial Stability Report that Ghana’s banking sector continued to be sound and solvent as evidenced by key financial soundness indicators, though there has been some deterioration in asset quality and efficiency.

Source: The Finder