Windfall for shareholders... as banks make record profits of GH¢1.4bn

Commercial banks in the country posted a record profit of more than GH¢1.43 billion last year in a period in which the fortunes of most businesses faltered amidst wobbly currency and energy supply challenges.

The performance of the banks is in spite of the fact that provisions they made for non performing loans inched up slightly in the face of the difficult operating environment that businesses especially SMEs find themselves in.

B&FT analysis of the audited financials of the banks show that the combined profit after tax of 22 of the 28 licensed banks jumped by more than a third from about GH¢1 billion in 2013 to a little above GH¢1.43 at the end of last year. This means that profit position of the entire banking sector could be close to GH¢2 billion remaining institutions publish their audited financial results for 2014.

All of the 22 banks tracked- six of which are listed on the Ghana Stock Exchange- saw a remarkable increase in earnings per share with the listed equities declaring an average of 47 per cent raise in their earnings per share, which is the portion of the profit allocated to each outstanding share of common stock, to show the continuous profitability of the equities of listed banks.

Some bankers who asked not to be named because they have not been authorized to talk to the press explained to the B&FT that the growth in the banks overall revenue was primarily driven by the quality of loans granted to customers as the growth in amount of money they set aside to cover future bad loans was reduced.

According to the Bank of Ghana, the non-performing loans (NPL) ratio of the entire banking system, adjusted for fully provisioned loans, increased to 5.6 percent at the end of December 2014 compared with 4.6 percent in the corresponding period in 2013.

However, the unadjusted NPL ratio declined to 11.3 percent from 12 percent in 2013.

NPLs tend to rise in a high interest-rate environment as borrowers find it more difficult to finance repayments. Central bank data show that the average interest on a bank loan is 29 percent per annum from 25.6 percent in December 2013.

Last year, the amount of loans that the 22 banks granted to their customers increased by half to GH¢17.6 billion.

At the same time, revenue that the banks generated from interests slapped on loans and advances- which they call interest income- increased to GH¢4.22 billion from GH¢3 billion a year earlier.

The Trade Minister, Ekoww Spio Garbrah is currently leading a campaign to bring down the cost of borrowing and make access to credit cheap for especially SMEs.

As of now, banks have tightened credit facilities to SMEs against a background of rising interest rates and a challenging business environment fuelled by the ongoing erratic energy supply.

While the central bank’s assessment of the credit environment show that the provision of credit by banks has been eased for large enterprises and households, SMEs and people looking for loans to buy houses on mortgages have seen access to credit constricted.