[ 2016-11-09 ]

Bad loans on books of banks worsens, local companies highest defaulters - See mo
The new financial stability report of the Bank of
Ghana (BoG) has revealed that Ghanaian companies
are still the biggest contributor of bad loans on
the books of banks.

According to the new report which covers
developments in the Ghanaian banking sector for
the first seven months of 2016 compared to the
same period last year, quality of loans on the
banks’ books generally worsened this year as
compared to the previous year.

But figures from the report shows the defaulters
are mainly Ghanaian companies.

According to the report the level of bad loans
associated with the private enterprises was driven
mainly by indigenous enterprises, which received
61.2 percent of credit to private enterprises but
accounted for 71.8 percent of Non Performing Loans
(NPL) s as at July 2016.

Even though the share of foreign enterprises in
total private sector credit declined from 10.8
percent in July 2015 to 8.9 percent in July 2016,
its contribution to private sector NPLs increased
from 11.6 percent to 7.9 percent during the review
period.

The central bank says the worsened NPL ratio can
be attributed to a number of factors, including
the general slowdown in the economy, increasing
cost of production due to high utility tariffs and
loan portfolio reclassification by some banks.

Non–performing loans (NPLs) increased by as
high as 69.4 percent from GH¢ 3.6 billion in July
2015 to GH¢ 6.1 billion in July 2016.

This translated into an NPL ratio of 19.1 percent,
up from 13.1 percent a year earlier.

Adjusting for the fully provisioned loan loss
category, however, the NPL ratio reduced to 11.0
percent in July 2016 although higher than the July
2015 position of 6.2 percent.

The sector’s capital-at-risk (NPL net of
provision to capital) worsened from 26.5 percent
at end-July 2015 to 36.4 percent at end-July
2016.

Loan loss provision to gross loans also increased
6.6 percent in July 2015 to 8.2 percent in July
2016.

Credit to the private sector contributed 85.8
percent of the total banking sector’s
non-performing loans as at July 2016, down from
97.8 percent in July 2015, while receiving 85.8
percent of total credit in July 2016 compared with
88.6 percent of credit received in 2015.

The proportion of banks’ NPLs attributable to
the public sector however increased significantly
from 2.2 percent in July 2015 to 14.2 percent in
July 2016.

Meanwhile households’ share of private sector
credit increased from15.3 percent to 16.0 percent
although its contribution to NPLs declined from
7.2 percent to 5.8 percent over the review period.


The largest sectors in terms of credit namely
Commerce and Finance, Services and the
Electricity, Gas & Water sectors also accounted
for the largest amount of banking sector NPLs of
66.2 percent as at end-July 2016.

The Transport, Storage and Communication sector
recorded the lowest NPL ratio during the review
period.

Source - citibsinessnews.com

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