Banking sector sees -5.4% dip in 2015

According to the Central Bank, the sector saw reduction in total revenue from the 34.9 percent growth experienced in 2014 to negative 5.4 percent in December 2015.

Similarly, the industry’s net profit after tax contracted by 10.5 percent in December 2015 compared with a growth of 35.5 percent in December 2014.

Some banks Pulse Business has spoken to, have confirmed considerable reductions in their profits for 2015.

The Central Bank's report, however, noted that interest income from loans continued to be the main source of income for the banking industry, constituting 51.5 percent of total income in December 2015 compared with 45.5 percent in December 2014.

Investment income share of 29.3 percent of total income in December 2015 was marginally above the 29.2 percent recorded in December 2014.

The share of income from fees and commission however declined to 11.6 percent in December 2015 from 12.8 percent in December 2014.

Also, indicators of operational efficiency showed deterioration in 2015, mainly because of the energy challenges which bloated the operational cost of banks and increased staff cost.

Cost to income ratio increased to 84.6 percent in December 2015 from 76.4 percent in December 2014 while cost to total assets ratio increased to 15.2 percent in December 2015 from 12.6 percent in December 2014.

Similarly, operational cost to total assets increased to 9.7 percent in December 2015 from 8.5 percent in December.

Operational cost to gross income also increased from 51.4 percent in December 2014 to 53.9 percent in December 2015.

On liquidity, the liquidity conditions of the banking sector however tightened in December 2015. All indicators of liquidity decreased but generally remained within acceptable thresholds during the period under review.

According to the Central Bank, growth in the sector’s income before tax registered a negative growth over the period from 34.9 percent in December 2014 to negative 5.4 percent in December 2015.

Similarly, the industry’s net profit after tax contracted by 10.5 percent in December 2015 compared with a growth of 35.5 percent in December 2014.

Already, financial statements released by some players in the industry indicate loses and reduction in their bottom-lines.

Indeed, the regulator confirmed that there were marginal declines in key financial soundness indicators in the fourth quarter of 2015 though the domestic banking sector remained sound and solvent during the period.

The report noted that interest income from loans continued to be the main source of income for the banking industry, constituting 51.5 percent of total income in December 2015 compared with 45.5 percent in December 2014. Investment income share of 29.3 percent of total income in December 2015 was marginally above the 29.2 percent recorded in December 2014.

The share of income from fees and commission however declined to 11.6 percent in December 2015 from 12.8 percent in December 2014.

Also, indicators of operational efficiency showed deterioration in 2015, mainly because of the energy challenges which bloated the operational cost of banks and increased staff cost.

Cost to income ratio increased to 84.6 percent in December 2015 from 76.4 percent in December 2014 while cost to total assets ratio increased to 15.2 percent in December 2015 from 12.6 percent in December 2014.

Similarly, operational cost to total assets increased to 9.7 percent in December 2015 from 8.5 percent in December

Operational cost to gross income also increased from 51.4 percent in December 2014 to 53.9 percent in December 2015.

On liquidity, the liquidity conditions of the banking sector however tightened in December 2015. All indicators of liquidity decreased but generally remained within acceptable thresholds during the period under review.

Domestic assets component of total assets increased by 24.1 percent to GH057.98 billion at the end of December 2015 compared with 39.9 percent growth recorded for the same period in 2014. Growth in foreign assets slowed down from the 69.4 percent recorded in December 2014 to 12.5 percent growth in December 2015.

The Central Bank concluded that Ghana’s banking sector continued to be sound and solvent as evidenced by key financial soundness indicators, though there has been some deterioration in asset quality and efficiency.

It added that the banking industry’s performance is expected to pick up with the improvement in the energy supply, ongoing fiscal consolidation reflected in the lower Treasury bill rates and relative stability in the exchange rate.