Listed Ghanaian banks posted record profits for the first half despite their loan-loss provisions rising by 17 percent from a year ago.

Earnings before tax of the banks – seven in all – jumped by 49 percent to GH¢0.65billion and their profit before tax margin increased slightly to 49 percent. The strong results have underpinned the 20 percent return on financial stocks in 2014.

Total banking revenues rose by 35 percent to GH¢1.3billion, boosted by 31 percent growth in net interest income and 30 percent growth in net income from fees.

The banks however increased the money set aside to cover expected losses on loan defaults, from GH¢75.6million to GH¢88.5million, and their average Non-Performing Loans (NPLs) ratio went up from 9.6 percent to 11.5 percent.

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 close to 30 percent per annum.

In July Simon Dornoo, Managing Director of GCB Bank and president of the Ghana Association of Bankers (GAB), said the sliding cedi – which has lost 27 percent against the dollar this year – raises the risk of banks incurring higher NPLs due to the potential for default among borrowers exposed to exchange rate volatilities.

In February the BoG asked banks to stop granting foreign-currency loans to borrowers who do not earn their income in foreign currency. It did this in a bid to curb the use of dollars in domestic transactions, which has partly been blamed for the weak cedi.

The central bank however said that foreign-currency loans that had been fully withdrawn prior to its February directive should be allowed to run until expiry.

GCB, the second-largest of the listed banks by assets-value, saw a fall in its NPL ratio from 15 percent in June 2013 to 14.5 percent in June 2014. The bank however raised its provision for loan losses from GH¢4.6million to GH¢11.6million.

Ecobank, the most profitable lender, saw half-year pre-tax profit exceed GH¢200million for the first time, and net profit for the same period hit a record of GH¢150million. The bank also posted the biggest growth, 96.5 percent, in earnings.

The total outstanding credit of the seven banks – which also include Stanchart, CAL Bank, UT, SG Ghana and HFC – soared by 44 percent to GH¢9billion.

Banks have however been criticised for concentrating credit in the hands of a few borrowers, while they enjoy wide interest spreads.

A new survey published this week by the Institute of Economic Affairs (IEA) concluded that “despite rapid growth of the financial sector, financial intermediation and financial deepening are low by international standards.”

Access, GT post healthy results

Access Bank and GT Bank, which are not listed in Ghana, posted healthy results in the first half, according to their statements published in the B&FT last week.

Pre-tax profit of Access stood at more than twice the level a year ago after rising to GH¢62.5million, while GT Bank said its earnings improved by 22.4 percent to GH¢37.6million.