Banks operating in Ghana appears to be enjoying good times despite some economic challenges. The banking sector recorded a 32.8 percent growth in its total assets, representing about GH¢36.17 billion at the end of December 2013.

This is about one-third of the economic size of the country per the provisional GDP estimate released by the Ghana Statistical Service late last year.

According to the latest Financial Stability Report on developments in the Ghanaian banking industry, the growth reflects in the sector’s foreign and domestic assets. While domestic assets grew by 32.9 percent at the end of December 2013 compared with the 24.9 percent growth for the same period in 2012, foreign assets also increased by 31.5 percent in December 2013.

The Bank of Ghana is therefore describing the banking sector as strong and well liquid, adding “these developments provided enough cushion for the sector to withstand any unexpected shocks.”

The Central Bank however, warned that the recent significant increases in banks’ short term external borrowing, expose the sector to shocks in the event of sharp reversal of these funds.

Importantly, banks recorded 60.1 percent profit after tax for 2013, lower than the 62.9 percent return recorded a year before.

According to the report, the banking industry net interest income grew by 50 percent in 2013 compared with 40 percent growth in December 2012. However, income from loans continued to be the main source of revenue and constituted 45.1 percent of total income in December 2013, compared with 47 percent in December 2012.

Income from fees and commission decreased to 13.4 percent in December 2013 from 17.7 percent in December 2012, but the interest spread increased to 11.6 percent in December 2013 from 10.3 percent in December 2012.

With regard to loans and advances, it grew by 32 percent to GH¢15.43 billion. This is however lower than the 40 percent growth recorded in 2012. Total deposits of the banking sector grew by 19.2 percent to GH¢23.33 billion as at the end of December 2013 compared with 22.5 percent growth recorded in December 2012.

Shareholders’ fund also increased by 32.3 percent to GH¢5.32 billion at the end of December

2013 compared with 32.7 percent growth recorded during the same period in 2012. Once again, return on assets increased to 6.2 percent at the end of December 2013 from 4.8 percent in December 2012. Similarly, return on equity increased to 31.1 percent in December 2013 from 25.8 percent in December 2012.

On sector allocation with regard to gross loans, the services sector overtook the Commerce & Finance sector as the highest recipient of credit accounting for 26.1 percent as at the of December 2013 compared with 26.3 percent in December 2012. The two sectors constituted 51.4 percent of total credit at the end of December 2013.

Credit allocation to other sectors including Mining & Quarrying, Construction, and Electricity,

Water & Gas improved while Transportation, Storage & Communication, and Agriculture, Forest & Fishing sectors recorded decreases during the review period.

The industry’s capital adequacy ratio also remained strong at 18.5 percent last year. The non–performing loans to gross loans ratio was 12 percent in December 2013 as against 13.2 percent in December 2012.