Banks assets quality in 2015 deteriorated as non–performing loans (NPLs)
increased from GH¢ 2.72 billion in December 2014 to GH¢ 4.52 billion in December 2015.

This represented a year-on-year increase of 14.9 percent over the period and also suggesting a difficult economy in 2015.

According to the latest Bank of Ghana’s Financial Satiability Report, the ratio of NPL net of provisions to capital deteriorated to 14.9 percent in December 2015 from 11.2 percent in December 2014. However, loan loss provision to gross loans increased to 6.6 percent in December 2015 from 4.6 percent in the same period in 2014.

Credit to the private sector accounted for 96.1 percent of the total banking sector’s non-performing loans as at December 2015 compared with 97.7 percent in December 2014. The proportion of banks’ NPLs attributable to the public sector deteriorated from 2.3 percent in December 2014 to 3.9 percent in December 2015.

Even though private enterprises received 71.1 percent of the private sector credit, they accounted for 88.7 percent of NPLs in the sector as at December 2015 compared with 68.5 percent of credit received and 88.2 percent of NPLs respectively in the same period in 2014.

Commerce and finance sector continued to account for the largest amount of the banking sector NPLs of almost 37 percent followed by services, and manufacturing with a share of about 19 and 13.3 percent respectively.

Electricity, Gas and Water sectors accounted for the lowest amount of the industry’s NPLs.

Meanwhile, the banking industry’s gross loans and advances grew in real terms by a meagre 6.7 percent at the end of December 2015 compared with 21.0 percent growth the same period in 2014.

The significant decline suggests the difficult economic environment banks operated last year.

According to the Bank of Ghana, credit to the private sector grew by only 6.3 percent at the end of December 2015 compared with 21.2 percent at the end of December 2014. Similarly, credit to households contracted by 8.1 percent last year compared with 23.7 percent growth recorded in the same period a year before.

Also, the composition of banks’ credit portfolio by economic institutions showed that the proportion of banks’ loans to government and public institutions declined from 6.8 percent in December 2014 to 5.3 percent in December 2015. Proportion of credit to private enterprises however increased to 77.6 percent of gross loans in December 2015 from 74.0 percent recorded in December 2014.

The three highest recipient sectors of credit, namely Commerce & Finance, Services, and Electricity, Gas & Water, accounted for 62.3 percent of credit allocation in December 2015 compared with 59.4 percent recorded in December 2014.

The share of credit allocation to other sectors including Manufacturing, Construction and Miscellaneous improved while Mining & Quarrying, Transportation, Storage & Communication, and Agriculture, Forest & Fishing declined during the review period.