Banks write off GH¢349 million as bad debt

Banks operating in Ghana have written off a further GH¢349.1 million as bad debts within the first four months of this year, the latest Banking Sector Report has revealed.

This is up from GH¢343.7 million at the end of the same period last year.

The provision for bad debts which included loan losses and depreciation stood at GH¢175 million at the end of February 2017.

According to the report, the indicators of asset quality as at April 2017 reflected some deterioration over the April 2016 performance.

The industry’s stock of NPLs increased by 24.5 percent to GH¢7.15 billion in April 2017 from GH¢ 5.74 billion in April 2016. The year-on-year growth in NPLs in April 2017 however represented a slowdown in the accumulation of NPLs from the 80.5 percent year-on-year growth recorded in April 2016.

The report stated that the deterioration in asset quality was largely attributed to the downgrading of some facilities following the Asset Quality Review of banks’ loans. Adjusting for the fully provisioned loan loss category, the NPL ratio hit 10.5 percent in April 2017, against 10.4 percent in the same period last year.

However, the proportion of banks’ non-performing loans attributable to the public sector declined sharply from 13.1 percent in April 2016 to 2.5 percent in April 2017 following the recent restructuring of the TOR and VRA debts.

But the share of public sector credit in total credit increased marginally to 13.7 percent from 13.4 percent, while the private sector credit share decreased to 86.3 percent from 86.6 percent during the same review period. The share of the private sector in banking sector’s non-performing loans, on the other hand, rose from 86.9 percent in April 2016 to 97.5 percent in April 2017.

By disaggregation, the report noted that indigenous enterprises accounted for a significant share of 78.9 percent of the total private sector credits’ non-performing loans in April 2017. The share of household credit in the total credit declined from 15.4 percent to 14.2 percent and also its contribution to non-performing loans declined from 7.6 percent to 5.6 percent over the review period.

Meanwhile, net advances remained the largest component of banks’ assets constituting 36.7 percent in April 2017, despite the decline from 42.0 percent in April 2016.

The share of investments in total assets increased from 24.5 percent in April 2016 to 29.4 percent in April 2017. The share of cash and short term funds in total assets was 25.6 percent as at April 2017 compared with 25.1 percent in the same period last year