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Universal banks in Ghana made a provision of GH¢231.52 million as bad debt for the first quarter of this year.

This is compared to GH¢140.21 million in the first three months of 2015, a 65.13 per cent increase. The provision includes loan losses and depreciation.

In March 2014, the banks wrote off GH¢175.31 million as bad loans but the figure fell to GH¢140.21 million in March 2015.

According to the Bank of Ghana’s Financial Stability Report, banks’ loan quality generally deteriorated in 2016. 

Non–performing loans (NPLs) increased by 59.9 per cent from GH¢3.1 billion in March 2015 to GH¢ 4.9 billion in March 2016.  This translated into an NPL ratio of 16.2 percent, up from 11.4 percent in March 2015.

The worsened NPL ratio was attributed to a number of factors, including the general slowdown in the economy, increasing cost of production due to high utility tariffs and reclassification of the loan portfolio of banks.

The sector’s capital-at-risk (NPL net of provision to capital) worsened from 12.5percent at end- March 2015 to 15.8percent at end-March 2016.

Loan loss provision to gross loans increased to 7.2 percent in March 2016 from 4.3 percent in the same period in 2015.

Also, the banking industry’s gross loans and advances recorded a negative growth of 5.8 percent in March 2016 due to the general slowdown in credit extension largely as a result of deteriorating asset quality.

Similarly, real private sector credit growth also declined sharply from 16.8 percent in March 2015 to 1.2 percent in March 2016.

In real terms, credit to households also contracted by 9.3 percent in March 2016 compared with the 15.1 percent growth recorded in the same period in 2015.

The composition of banks’ credit portfolio by economic institutions showed that the proportion of banks’ loans to Government and public institutions decreased from 6.0 percent in March 2015 to 4.1 percent in March 2016. The proportion of credit to private enterprises in banks’ total loan portfolio however increased to 78 percent in March 2016 from 75.7 percent in March 2015. The share of household loans in gross loans however declined marginally to 15.5 percent in March 2016 from 15.6 percent in March 2015.

Credit to public enterprises accounted for 2.4 percent of gross loans and advances in March 2016, compared with 2.8 percent in March 2015.

The Commerce & Finance sector remained the highest recipient of credit, accounting for 24.7 percent as at March 2016 compared with 24.2 percent in March 2015.

The three highest recipients of credit, namely Commerce & Finance, Services, and Electricity, Gas & Water accounted for 60.1 percent of total banking sector credit in March 2016 (61.6 percent in March 2015).

In the review period, the share of credit to sectors such as construction, mining and quarrying and Agriculture, Forest & Fishing improved; while that of Electricity, water and gas, Manufacturing and Services sectors declined.