THE BANKING sector recorded strong profit performance during the first eight months of 2019, compared with the same period last year.
The industry recorded an after-tax profit of GH¢2.24 billion, a 38.4 per cent growth over profits recorded by the banking sector for the same period last year (43.9 per cent growth in August 2018).
The 2019 Banking Sector Report, released by the Bank of Ghana (BoG) recently, which made this known, said 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).
It said the higher growth in net interest income reflected both higher interest income from investments and credit.
Total assets of the banking sector amounted to GH¢115.18 billion, as at end-August 2019, recording an annual growth of 10.1 per cent. Domestic assets, which constitute a larger proportion of total assets, increased by 12.9 per cent to GH¢105.76 billion, while foreign assets contracted by 14.0 per cent on account of reductions in both banks’ nostro balances and placements abroad.
Following these developments, the share of domestic assets inched up to 91.8 per cent in August 2019, from 91.2 per cent in June, while the share of foreign assets declined to 8.2 per cent from 8.8 per cent over the same period.
Banks’ Counterparty Relationships
Banks’ offshore balances declined from GH¢10.33 billion in August 2018, to GH¢8.78 billion in August 2019, representing a contraction by 15.0 per cent against a growth of 45.4 per cent a year earlier.
The contraction in banks’ offshore balances was on account of declines in both banks’ nostro balances and placements abroad. Accordingly, the ratio of offshore balances to net worth dropped significantly from 75.9 per cent in August 2018, to 52.5 per cent in August 2019, an indication of reducing exposure of the industry to cross-border risks
“The gradual recovery in credit growth is expected to be sustained on the back of strong deposit growth and sufficient capital levels,” the report said, while also it projected a further improvement in asset quality.
It continued that banks were expected to strengthen their credit risk management processes as well as intensify their loan recovery efforts.
The review stated that significant gains have been made since the onset of the banking sector reforms two years ago.
It said in particular, a well-capitalized, solvent, liquid and profitable banking sector had emerged with improved financial soundness indicators, as also asset growth was robust.