The stock of Non-Performing Loans in the banking sector reached GH¢8.74 billion in June this year, according to the latest banking sector report.
The report released by the Bank of Ghana showed that since the last time the figures were released in April 2018, it has gone up by some GH¢11 million since June.
The Non-Performing Loan ratio increased between June 2017 and June 2018 although the annual rate of growth of non-performing loans declined in June 2018, with a significant portion of the banks’ loan books remaining impaired.
About the Bank of Ghana Data
This report covers developments in the Ghanaian banking sector as at the end of June 2018.
The industry comprised 34 licensed banks, 17 classified as domestically-controlled, while the remaining 17 were foreign-controlled.
Details of the Non-Performing Loans
The report noted that credit risk within the banking sector remained elevated with about a fifth of all loans within the industry being classified as non-performing. The non-performing loans ratio, however, declined marginally from April 2018.
The pace of loan impairment also slowed in June 2018 compared with a year earlier. As part of measures to ensure that banks manage credit risks efficiently and also have enough capital to absorb losses, Bank of Ghana has issued the Capital Risk Directives.
The ratio of banks’ total loans classified as impaired remained high in June 2018. However, the NPL ratio fell to 22.6 per cent in June 2018 from the last reported position of 23.5 per cent in April 2018. The comparative position for June 2017 was 21.2 per cent.
Adjusting the industry’s NPL ratio for the fully provisioned loan loss category reduces the ratio to 12.3 per cent in June 2018 compared with an adjusted NPL ratio of 11.3 per cent in June 2017.
In spite of the increase in the NPL ratio over the one-year period, growth in non-performing loans slowed down considerably to 9.7 per cent as at end June 2018, compared with an annual growth of 30.7 per cent in June 2017.
The stock of non-performing loans stood at GH¢8.74 billion by the end of the second quarter of 2018.
Break down of the Non-Performing Loans
The bulk of NPLs in the industry as at end June 2018 were attributed to the private sector, though its share in total NPLs declined to 89.9 per cent from 94.9 per cent in June 2017.
On the other hand, the proportion of impaired assets attributed to the public sector increased from 5.1 to 10.1 per cent over the same comparative period. With the increase in the share of household credit in total credit within the review period, the share of household NPLs in total NPLs also went up from 5.1 per cent in June 2017 to 6.3 per cent in June 2018.
A breakdown of NPLs into sectors indicated that the Commerce & Finance, Services and Electricity, Gas and Water sectors accounted for 56.3 per cent of total outstanding credit balances in the banking industry as at end June 2018.
A quarter of all loans in the industry were, however, attributed to the Commerce and Finance sector alone by the end of the review period. The Mining and Quarrying sector, as well as the Agriculture, Forestry & Fishing sector, accounted for the smallest outstanding credit balances of 2.4 and 3.9 per cent respectively.
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