13:43, 20.Jul 2016
The latest Banking Sector Stability report by the Bank of Ghana has shown that non-performing loans (NPLs) of banks increased by 36.17 per cent between February 2016 and the same period this year.
The figure increased from GHS4.7billion to GHS6.4 billion within the 12 months’ period. The report also revealed that commerce and finance accounted for the highest non-performing loans of banks.
According to the report, “the high NPLs continue to pose upside risks to the banking industry, despite the marginal decline in the energy-sector related debt exposures”.
This also 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 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 NPL ratio of 17.7 per cent for February 2017 is, however, an improvement over the January 2017 NPL ratio of 18 per cent.
Contributors to the high non-performing loans included commerce and finance, with 39.7 per cent. This is followed by services and the electricity, gas, and water sectors with 13.6 and 10.1 per cent respectively. The three sectors represented 63.4 per cent of the total NPLs of the banking sector.
Meanwhile, the services, electricity, gas, and water sectors’ NPL ratio is expected to improve following the conclusion of restructuring arrangements for the industry’s exposure to the Bulk Oil Distribution Companies (BDCs). This, together with additional efforts by banks to tighten credit risk management practices and intensify loan recovery efforts, particularly for large non-oil related exposures, could lead to further reduction in the NPL ratio.