Banking sector records strong asset growth -Report

The banking sector total assets in the first-half of the year soared 33.3 per cent to GH¢323.2 billion relative to the growth of 21.2 per cent recorded in the same period last year, the Bank of Ghana (BoG) has stated in its latest Monetary Policy Report.

It said the higher growth in assets was driven by a robust growth in deposits, as and other funding sources.

The July 2024 Monetary Policy report said foreign assets grew by 57.6 per cent in June 2024, compared to 74.5 per cent recorded in the same period last year, while domestic assets grew by 31.0 per cent in June 2024, compared to the 17.8 per cent growth same period last year.

“Investments grew by 19.2 per cent to GH¢107.2 billion in June 2024, up from a growth of 11.0 per cent in June 2023, due to a significant growth in both short-term and long-term instruments,” noted by the report issued in July this year.

The report said the growth in investments reflected a 7.3 per cent growth in short-term bills, from a growth of 149.6 per cent in June 2023, while long-term investments (securities) also grew by 28.6 per cent in June 2024, having contracted by 23.2 per cent in June 2023.

“The mixed growth in both bills and securities investments culminated in a reduced share of investments in total assets to 33.2 per cent in June 2024, from 37.1 per cent in June 2023,” the BoG stated.

The monetary report for July 2024 also indicated that gross loans and advances rose by 15.6 per cent to GH¢84.5 billion in June 2024, relative to a 15.4 per cent growth in June 2023 and growth in net loans and advances (gross loans adjusted for provisions and interest in suspense) also moderated to 10.3 per cent, from 11.3 per cent during the same period last year.

It said deposits remained the main source of funding for the banking sector, accounting for 76.1 per cent share of total assets in June 2024, from 77.4 per cent in June 2023, stating that deposits improved by 31.1 per cent to GH¢245.9 billion in June 2024, as against 42.8 per cent growth recorded in June 2023.

“The foreign currency component of deposits grew by 29.8 per cent to GH¢81.2 billion in June 2024, relative to a growth of 62.5 per cent in June 2023, suggesting some currency depreciation effect on the overall growth in total deposits,” the BoG stated.

It said the banking sector’s performance in first half pointed to continuing recovery from the macroeconomic challenges which started in 2022 due to the coronavirus pandemic.

“The banking sector posted strong performance during the first six months of 2024, on the back of sustained increases in deposits and other funding sources. The financial soundness indicators remained healthy, with improved solvency, liquidity, and profitability,” the BoG stated in latest Monetary Report.

The Monetary Policy report further noted that the banking sector remained profitable, liquid, and generally efficient during the review period, with stable solvency reflecting the rebound in profitability in the industry post-DDEP implementation, as well as the ongoing recapitalisation effort by banks.

It said the banking sector outlook remained stable, but recapitalisation and enforcement of stringent credit underwriting standards, and intensified loan recovery efforts were critical to ensuring good performance of the banking sector in the medium term.

BY KINGSLEY ASARE