Banking sector shows strong growth

...interest rates dip By Kofi Ahovi Provisional data from the Bank of Ghana (BoG) has shown that the banking sector continues to grow steadily in the first eight months of the year. On a year-on-year basis, total bank assets grew by 28.2% while total deposits increased by 39.2% at the end of August 2011. Industry liquidity and profitability indicators also remained favourable. The asset quality of the banking industry improved during the period. The Non-Performing Loan (NPL) ratio also improved marginally to 16% at the end of August 2011, compared with 16.4% at the end of August 2010. The Banks were also solvent, as the industry achieved a Capital Adequacy Ratio (CAR) of 16.9%, well above the 10% statutory threshold. However, the survey of credit conditions in the banking industry conducted by the Bank of Ghana in September showed a marginal tightening of credit stance for enterprises and households, a reversal of the easing credit stance were recorded in previous surveys. “Non-price factors such as the requirement of additional collateral security and credibility of cash flows were used to reject loan applications,” the report stated. The survey also revealed that majority of banks expected inflation to remain below 10% for 2011. On the other hand, interest rates on government securities declined consistently between January and July 2011. In the months of August and September however, rates remained broadly stable, especially at the short-end of the market. From 12.2% in January, the 91-day Treasury bill rates declined to 9.4% in September 2011. Similarly, the 182-day Treasury bill rates shed 2.6% to settle at 10% in September. The rates on the 1-year note also declined by 220 basis points from the beginning of the year to 11% in September, while the 2-year fixed note rates went down by 80 basis points to 11.7% in September 2011. Overnight interbank rates, the rate at which commercial banks deal with each other, dropped from 11.7% in January to 10.6% in September 2011. The average bank lending rate fell from 27.6% in January to 27% in June and has since remained unchanged. However, average base rate quotations showed consistent declines from 25.8% in January to 23.3% in September 2011. The average three-month deposit rates of commercial banks fell to 8.3% in September 2011 from 10.5% in December 2010. The average savings deposit rate also declined by 1.6 percentage points to 4.4% in September 2011.