Bank lending to private sector declines by GH¢1.24bn in May

Credit to the private sector declined by GHc1.24 billion in May 2020, according to the latest Bank of Ghana (BoG) Statistical Bulletin.

This occurred during the peak of the coronavirus pandemic in the wake of government’s partially lockdown of the economy’s two biggest hubs for three weeks.

According to the data, banks and other financial institutions loaned GHc17.09 billion, GHc15.59 billion and GHc14.35 billion to consumers in March, April and May 2020 respectively.

But the consecutive monthly drop in credit from March to May 2020 is largely attributed to banks tough stance on credit, amid the coroanvirus pandemic.

Instructively, most of the banks in Ghana began revising downwards their budget for loans and advances to consumers immediately COVID-19 started creating global uncertainty, according to some credit analysts.

The revised lending activities indicate that the financial intermediaries are most mindful of their asset quality, in this era of uncertainty in the Ghanaian and global economies.

Majority of the banks are expected to adopt a wait and see attitude going forward till the COVID-19 pandemic starts seeing signs of improvement.

MPC Report

The July 2020 Monetary Policy Report revealed that Domestic Money Banks (DMBs’) credit to the private sector slowed in June 2020 on account of elevated loan default risks and moderated demand for credit, reflecting the impact of the COVID-19 pandemic on the real sector.

Annual growth in private sector credit thus declined to 12.4 percent in June 2020 compared with 16.8 percent growth in the same period of 2019.

Half-year financial performance

First half-year financial statements of some banks reveale that the banks net fees and commissions grew marginally or went down. This is largely attributed to a tight stance on credit to the private sector.

For instance, CAL Bank witnessed a reduction in net fees and commission [an income banks largely rake in from fees charged on loans]. It declined from GHc261 million in the prior first half year to GHc242 million up to June 2020.

However, Societe Generale increased its net fees and commissions by nine percent to GHc341 billion in the first half of the year.

But most of the income was expected to have been realized in the first quarter of 2020, a period in which COVID-19’s impact was extremely low.