Banks write off GHC175 million

Bank's total provision for the first two months still remained high, according to the latest Banking Sector Report.

Commercial banks in Ghana made a provision for bad debt of GH¢175 million at the end of February 2017, as against GH¢171 million the same period last year. A total of GH¢1.5 billion was however made as provision for bad debts by the banks.

The provision for bad debts includes loan losses and depreciation.

According to the report, the industry’s stock of non-performing loans increased to GH¢6.4 billion in February 2017 from GH¢4.7 billion in February 2016. The increase in the stock of NPLs, with no commensurate increase in gross advances, led to a higher NPL ratio of 17.7 per cent in February 2017, compared with 15.6 per cent in the same period last year.

The deterioration in asset quality according to the Central Bank said was largely attributed to the Asset Quality Review of bank loans in 2016 which led to the downgrade of some existing loans by banks. The February 2017 NPL ratio of 17.7 per cent however, signaled an improvement over the January 2017 NPL ratio of 18.0 per cent.

Adjusting for the fully provisioned loan loss category, the NPL ratio was 8.6 per cent in February 2017, against 7.6 per cent in February 2016. The high non-performing loans were driven mainly by Commerce & Finance (39.7 percent), Services (13.6 percent) and the Electricity, Gas & Water (10.1 percent) sectors. Together, these three sectors represented 63.4 per cent of the total NPLs of the banking sector.

Meanwhile, net advances remained the largest component of banks’ assets though its share declined to 37.4 per cent in February 2017 from 42.9 per cent a year earlier.

However, the share of investments in total assets increased to 29.2 per cent in February 2017 from 23.3 per cent in February 2016, while the share of cash and short term funds rose to 25.4 from 24.7 per cent over the same comparative periods.