Banks in Ghana registered a negative 4.3 percent for the 2016 financial year, according to the latest Financial Stability Report from the Bank of Ghana (BoG).

This is, however, an improvement from a negative growth of 7.4 percent recorded during the same period last year.

According to the report, the year-on-year growth of the industry’s net interest income declined from 35.2 percent in December 2015 to 17.1 percent in December 2016.

The industry’s income before tax registered an annual growth of 0.9 percent for the period ending December 2016 compared with a year-on-year contraction of 3.1 per cent in December 2015.

The industry’s profitability indicators moderated in 2016 compared with 2015. Profitability indicators, namely return on equity (ROE) and return on assets (ROA) fell during the period under review. The banking industry’s ROA decreased from 4.6 percent in December 2015 to 3.8 percent in December 2016 while the ROE declined from 22.1 percent to 18.0 percent over the same comparative periods.

But the industry remained solvent in 2016. The industry’s capital adequacy ratio stood at 17.8 percent as at end-December 2016, above the 10.0 percent statutory requirements of the Bank of Ghana. The industry’s Risk-Weighted Assets to total assets, however, declined from 71.8 percent in December 2015 to 63.7 percent in December 2016 partly due to the tight credit stance adopted by banks during the year.

On composition of banks income, interest income from loans remained the main source of income for the banking industry in 2016. Interest income from loans constituted 50.7 percent of total income compared with 51.5 percent in December 2015.

Interestingly, banks relied more on investments as a source of income with the share of investment income in banks’ total income increasing from 29.3 percent in December 2015 to 33.5 percent in December 2016. The proportion of fees and commission in total income, however, declined to 10.6 percent in December 2016 from 11.6 percent recorded in the corresponding period last year.

For operational efficiency, the banking industry cost to total assets ratio increased marginally from 15.2 percent in December 2015 to 15.3 percent in December 2016. The cost to income ratio also increased to 87.7 percent in December 2016 from 84.1 percent in December 2015, indicating a general decline in efficiency during the period.

On a whole, the Central Bank noted that the Ghanaian banking industry continued to be safe and sound, although marginal declines were recorded in some key financial soundness indicators during 2016.

It stated that a major source of concern for the banking sector was the rising non-performing loans. However, this was addressed as the year closed and the NPL ratios have started declining.

Liquidity indicators also remained above the acceptable thresholds while industry solvency met the minimum regulatory requirements.

It concluded that the outlook for the industry remained positive and the continued repayment of the energy sector SOEs debts owed banks and bulk oil distribution companies (BDCs) was expected to boost performance further.