Bad loans on the books of banks in Ghana increased to 4.52 billion cedis in 2015.
This is a 14.9 percent increase in the figure reported in 2014.
[contextly_sidebar id=”gXE8ZGAwuVhDtAjIFSEoYq6e6kHfO8rz”]According to the Bank of Ghana’s financial stability report released in January 2016 banks loan quality generally deteriorated in 2015 with an increase in the non–performing loans (NPLs) from GH¢ 2.72 billion in December 2014 to GH¢ 4.52 billion in December 2015, representing a year-on-year increase of 14.9 percent over the period.
The adjusted NPL ratio (i.e. NPLs ratio minus the loss category) of 6.9 percent as at December 2015 also represented deterioration over the 5.6 percent recorded in December 2014.
Similarly, the ratio of NPL net of provisions to capital deteriorated to 14.9 percent in December 2015 from 11.2 percent in December 2014.
However, loan loss provision to gross loans increased to 6.6 percent in December 2015 from 4.6 in the same period in 2014.
Credit to the private sector contributed 96.1 percent of the total banking sector’s non-performing loans as at December 2015 compared with 97.7 percent in December 2014. The proportion of banks’ NPLs attributable to the public sector deteriorated from 2.3 percent in December 2014 to 3.9 percent in December 2015.
Even though private enterprises received only 71.1 percent of the private sector credit, they accounted for 88.7 percent of NPLs in the sector as at December 2015 compared with 68.5 percent of credit received and 88.2 percent of NPLs respectively in the same period in 2014.
The highly disproportionate level of NPLs associated with the private enterprises was driven mainly by indigenous enterprises, which received 60.9 percent of credit to private enterprises but accounted for 78.7 percent of NPLs as at December 2015.
However, while foreign enterprises’ share of private sector credit declined, their contribution to private sector NPLs increased marginally over the period under review.
Households’ share of private sector credit and contribution to NPLs increased marginally over the review period.
Commerce and finance sector continued to account for the largest amount of the banking sector NPLs followed by services, and manufacturing.
The three sectors accounted for 69.3 percent of NPLs in December 2015 compared with 66.7 percent in December 2014. Electricity, Gas and Water sector accounted for the lowest amount of the industry’s NPLs.
By: Vivian Kai Lokko/citifmonline.com/Ghana