Banking sector’s performance worrisome - Adongo urges innovative ways to reverse fortunes
The Member of Parliament for Bolgatanga Central, Mr Isaac Adongo, has expressed worry about the health of the banking sector after recent data from the Bank of Ghana (BoG) showed that “all the major indicators are declining.”
He, therefore, called on the central bank and the Ministry of Finance to find innovative ways to reverse the trend to help inspire growth in financial institutions and the economy in general.
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At a forum in Accra, Mr Adongo noted that a trend analysis over a period of one year, showed that the health of the banking sector had not been the best and as such urgent steps needed to be taken to improve its fortunes.
On liquidity, he said although the government had painted the picture that the recently issued energy sector bonds were meant to improve liquidity in the banking sector, on liquidity had actually declined relative to the state it was a year ago.
It fell from 22 per cent in December 2016 to 16.7 per cent in December 2017, he said, quoting BoG data.
“Private sector credit (PSC) as of December 2016 was 14.4 per cent but it dropped to 12.8 per cent in December last year. In fact, one of the reasons why we dropped on the Ease of Doing Business rankings is because we dropped by 12 points on credit to the private sector.
“So, clearly, the private sector is not getting money,” he said.
Unlike other indices that can be played with, Mr Adongo said “figures do not lie” and thus asked the government to take a second look at its policies for growth to rebound
Forum
He made the claim last week at a forum organised by pro-National Democratic Congress group, Coalition for Restoration (CFR).
It was on the theme: ‘The True State of the Nation.’ It was meant to give the panellists – Messrs John Jinapo and Mohammed Murtala – both former deputy ministers – the opportunity to present the NDC’s perspective on the state of affairs in the country.
Speaking on the state of the financial sector, Mr Adongo said BoG’s summary of economic data released in January this year, showed that key indices such as liquidity, private sector credit, deposits, non-performing loans (NPLs) and capital adequacy ratio had worsened in recent times.
Saving excess money
He added that growth in total assets of the banking sector also declined from 30.4 per cent to 12.8 per cent. In December last year, total assets of the banking sector was reported at GH¢93.2 billion compared to GH¢82.6 billion in December 2016.
“In December 2016, deposits grew by 27.8 per cent but now it has declined to 10.6 per cent in December 2017,” he said.
He added that the sharp decline in deposits showed that things were difficult for people hence their inability to leave excess money that could be saved.
On advances, which measures loans to the private sector and households, Mr Adongo said the BoG data showed that it had declined from 18.3 per cent to 5.9 per cent within the 12-month period.
On capital adequacy ratio (CAR), he said although the BoG Governor, Dr Ernest Addison, had painted a positive picture about the indicator, the data released by the bank showed otherwise.
He said the CAR, which measures banks’ risk weighted credit exposure, dropped from 18 per cent in December 2015 to 15 per cent in December 2017.
He also criticised the strong growth in NPLs, explaining that the trend showed that the energy bond had failed to clean the bad loans in the banking sector, contrary to the BoG and the government’s position on the matter.
He said in spite of the bond issuance, the data showed that NPLs, which measured the ratio of bad debt as a per cent of total loans, rose from 17.3 per cent in December 2016 to 22.7 per cent in December 2017.
“This was supposed to be a landmark transaction yet everybody is quite. You know why? It is because they did a debt swap,” he alleged.
Expert opinion
In an interview, a banking expert and former Deputy Governor of the BoG, Mr Emmanuel Asiedu-Mante, said although the figures could be true, they could also be deceptive, given limitation of ratios.
“All the numbers used are in percentage terms. I would have been happy if they were in absolute terms so that we know whether the absolute numbers are going down or up. Percentages can be deceptive,” he said.
He, however, admitted that the growth in NPLs was “bad.”