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Bank of Ghana
Monetary Policy Report
Financial Stability

Volume 5: No.2/2012

April 2012

5.0 Introduction
Global economic risks, which partly stemmed from the Greece sovereign debt crises, have weakened
considerably. The moderation of the crises could be attributed to liquidity injections into the banking system of the
euro area and the approval of the Extended Credit Facility (ECF) by the IMF to Greece. Declining unemployment
rates as well as increased consumer spending have also culminated in a gradual boost in economic activity in the
United States but the Asian region continued to dominate growth in the global economy despite a slight
moderation in the regions growth rate.
The domestic economy faces possible risks as a result of the recent pressures on the domestic currency and the
possible transmission of global developments to the domestic economy through trade and credit channels. This
notwithstanding, the banking sector remained robust with sound financial soundness indicators, measured in
terms of earnings, portfolio quality, liquidity, and capital adequacy.

5.1 Credit Conditions Survey

5.1.1 Loans or credit lines to Enterprises
Credit stance on loans improved during the March 2012 survey period with net easing of credit stance to
enterprises with different sizes and maturity. Banks eased credit stance on loans or credit lines to enterprises as
at the end of March 2012 (See Chart 1). The easing of credit stance reflected banks expectation of economic
activity, banks ability to access market financing and cost of fund and balance sheet constraints. Factors such as
security requirements, margins on average and riskier loans and maximum size of loan also contributed to the net
easing of credit stance (See Chart 2).

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Chart 1: Overall Credit Stance

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80
60

Net tightening

NPR (%)

40
20
0
-20

Net easing

-40
Overall Credit Stance for Enterprises

Notes: (NPR) -Net percentage refers to the difference between the sum of the percentages for tightened considerably and tightened somewhat and the sum of the
percentages for eased somewhat and eased considerably. The net percentages for the questions related to the contributing factors are defined as the difference
between the percentage of banks reporting that a given factor contributed to a tightening and the percentage reporting that it contributed to an easing

Chart 2: Enterprise Credit Stance

80
60

Net tightening

40

NPR (%)

20
0

-20
-40

Net easing

-60
Small and Medium Enterprises

Large Enterprises

5.1.2 Loan Demand

Loan request for fixed investment, inventories and working capital and for debt restructuring decreased resulting
in decline in enterprises overall demand for credit. (see Chart 3a and 3b).
Chart 3a: Usage of credit
60

NPR (%)

40
20
0
-20
Fixed Investment
Inventories and working capital
Debt restructuring
Changes in terms on loans to corporates

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Chart 3b: Enterprise Demand for Credit

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70
60

NPR (%)

50
40
30
20
10
0

Overall

Small and Medium Enterprises

Large Enterprises

Notes: The net percentages for the questions on demand for loans are defined as the difference between the sum of the percentages for increased considerably and
increased somewhat and the sum of the percentages for decreased considerably and decreased somewhat.

5.2 Loans to households for house purchase

Banks eased credit stance on loans to households for house purchases on account of banks expected capital
position, expectation regarding general economic environment, competition from other banks and changes in
adversely classified loans (see chart 4).
Chart 4: Credit Stance on Households Credit
80
60

20

Mar-12

Jan-12

Nov-11

Sep-11

Jul-11

May-11

Mar-11

Jan-11

Nov-10

Sep-10

Jul-10

May-10

-40

Jan-10

0
-20

Mar-10

NPR (%)

40

Overall
Loans for house purchase
Consumer credit and other lending

5.2.1 Loan demand

Households demand for credit for mortgages however declined in March 2012 survey compared with January
2012.
5.2.2 Consumer credit and other lending to households
Household access to credit deteriorated, on account of increase in margin on riskier loans, security requirements,
changes in corporate loan demand, non interest loan costs and maximum size of loans (see Chart 4 and 5).
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Chart 5: Measure of Tightening/Easing

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60
50
40

NPR (%)

30
20
10

-20
-30

Mar-08
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Sep-10
Nov-10
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12

0
-10

Your banks margin on average loans

Non interest loan costs
Maximum size of the loan
Security / collateral requirements

5.3 BANKING SECTOR STABILITY ANALYSIS

5.3.1 Developments in Banks Balance Sheet
The total assets of the banking sector as at February 2012 grew by 26.6 per cent compared with 25.2 per cent in
the same period in 2011. Domestic currency denominated assets increased by 24.6 per cent by the end of
February 2012 compared with a 25 per cent growth for the same period in February 2011. Foreign currency
denominated assets also grew by 46.9 per cent in February 2012 compared with an increase of 26.3 per cent for
the corresponding period in 2011 (see Table 1).
Net loans and advances of GH8.9 billion represented a year-on-year growth of 37.1 per cent in February 2012
compared with a slower growth rate of 5.7 per cent recorded in February 2011. Banks investment portfolio (bills
and securities) reached GH6.2 billion and showed an annual growth of 20.3 per cent by the end of February
2012 compared with a growth of 44.6 per cent at end February 2011 (see Table 1).
Deposit liabilities which continued to be the main source of banks funding grew by 33 per cent from GH12.1
billion in February 2011 to GH16.1 billion in February 2012. Total borrowings increased in year-on-year terms by
9.2 per cent, up from GH1.3 billion in February 2011 to GH1.9 billion in February 2012 (see Table 1).
Banking industry paid up capital also increased by 18.4 per cent to GH 1.7 billion by the end of February 2012,
compared with the 17.6 per cent growth in February 2011 (see Table 1).

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Feb-10

TOTAL ASSETS

14,276.5
1,280.6
12,995.9
3,534.6
2,022.6
1,452.9
6,153.9
1,681.6
7,050.1
770.8
452.6
14,276.5
9,246.2
2,475.9
1,754.0
1,106.4
548.0
329.2
229.2
11,266.1
735.0
141.8
9,017.0
1,324.3
1,186.1
1,892.8

A. Foreign Assets
B. Domestic Assets
Investments
i. Bills
ii. Securities
Advances (Net)
of which Foreign Currency
Gross Advances
Other Assets
Fixed Assets

TOTAL LIABILITIES AND CAPITAL

Total Deposits
of which Foreign Currency
Total Borrowings
Foreign Liabilities
i. Short-term borrowings
ii. Long-term borrowings
iii. Deposits of non-residents
Domestic Liabilities
i. Short-term borrowing
ii. Long-term Borrowings
iii. Domestic Deposits
Other Liabilities
Paid-up capital
Shareholders' Funds

Feb-11
17,868.2
1,617.4
16,250.8
5,112.1
3,243.6
1,573.3
6,502.4
2,027.7
7,427.5
1,107.0
499.7
17,868.2
12,139.4
3,320.9
1,724.2
1,030.2
433.6
289.0
307.6
14,307.7
816.1
185.5
11,831.8
1,415.9
1,395.2
2,506.0

22,625.0
2,376.1
20,248.9
6,150.6
3,868.7
2,156.5
8,912.0
3,197.6
9,937.0
893.1
591.7
22,625.0
16,141.4
4,675.1
1,883.1
1,334.3
365.9
403.1
565.3
18,134.2
821.9
292.1
15,576.1
1,382.1
1,651.8
3,139.7

T. 1 9 5 7

Shares
Feb-12

Y-on-y Growth (%)

Feb-11
Feb-12

Feb-12

NA

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Table 1: Key Developments in Banks Balance Sheet

Key Devts in DMBs' Balance Sheet

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25.2

26.6

26.3
25.0
44.6
60.4
8.3
5.7
20.6
5.4
43.6
10.4
25.2
31.3
34.1
(1.7)
(6.9)
(20.9)
(12.2)
34.2
27.0
11.0
30.8
31.2
6.9
17.6
32.4

46.9
24.6
20.3
19.3
37.1
37.1
57.7
33.8
(19.3)
18.4
26.6
33.0
40.8
9.2
29.5
(15.6)
39.5
83.7
26.7
0.7
57.4
31.6
(2.4)
18.4
25.3

100.0
10.5
89.5

27.2
17.1
9.5
39.4
14.1
43.9
3.9
2.6
100.0
71.3
20.7
8.3

5.9
1.6
1.8
2.5
80.2
3.6
1.3
68.8
6.1
7.3
13.9

5.3.1 Asset and Liability Structure of the Banking Industry

The banks balance sheet structure as of February 2012 showed marginal decrease in the share of investments in
total assets relative to the same period in February 2011. The share of the banking sector assets and liabilities is
shown in Table 2 below:
Table 2: Asset and Liability Structures of the Banking Sector
Feb-07

Feb-08

Feb-09

Feb-10

Feb-11

Feb-12

Cash and Due from Banks

Investments
Net Advances
Other Assets
Fixed Assets

Components of Assets (In Percent of Total)

20.9
21.8
21.8
25.3
17.2
17.3
45.8
49.7
52.6
4.5
7.9
5.0
3.4
3.3
3.2

23.5
24.8
43.1
5.4
3.2

25.9
28.6
36.4
6.2
2.8

26.7
27.2
39.4
3.9
2.6

Total Deposits
Total Borrowings
Other Liabilities
Shareholders' Funds

Components of Liabilities (In Percent of Total)

65.8
63.2
62.8
64.8
11.9
12.7
13.9
12.3
9.8
12.3
9.7
9.3
11.8
11.0
13.1
13.3

67.9
9.6
7.9
14.0

71.3
8.3
6.1
13.9

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The share of net loans & advances in banks assets of 39.4 per cent in February 2012 was an improvement over
the 36.4 per cent recorded in February 2011. Investments (in both bills and securities) as a proportion of total
assets decreased from 28.6 per cent in February 2011 to 27.2 per cent in February 2012.
Total deposits accounted for 71.3 per cent of total liabilities at the end of February 2012 compared with 67.9 per
cent recorded in 2011. However, the proportion of shareholders funds in total liabilities dipped marginally from 14
per cent in February 2011 to 13.9 per cent in February 2012. The share of total borrowings in total liabilities also
declined to 8.3 per cent as at February 2012 from 9.6 per cent registered in February 2011 (see Table 2).
5.3.2 Share of Banks Investments
Chart 6 shows the distribution of the banks investment portfolio between February 2007 and February 2012.
Banks investment in securities (long term investments) as a share of total investment increased significantly from
30.8 per cent in February 2011 to 35.1 per cent in February 2012 but investment in treasury bills as a share of
total investment declined to 62.9 per cent in February 2012, from 63.4 per cent in February 2011 (see Chart 6).
Chart 6: Banks Investment (%)
100.0
90.0
80.0
70.0

Percent

60.0
50.0
40.0
30.0
20.0
10.0
Feb-07

Feb-08

Feb-09

Feb-10

Feb-11

Feb-12

Securities/Total Investments

58.6

64.8

26.7

41.1

30.8

35.1

Bills/Total Investments

40.4

33.9

59.9

57.2

63.4

62.9

Chart 7. Portfolio Allocation (%)

Portfolio Allocation

100.0
90.0
80.0
70.0

Percent

60.0
50.0
40.0
30.0
20.0
10.0
-

Feb-07

Feb-08

Feb-09

Feb-10

Feb-11

Feb-12

Credi t to Depos i t

75.0

83.7

90.0

76.2

61.2

61.6

Credi t to Total As s ets

45.8

49.7

52.6

43.1

36.4

39.4

Inves tments to Total

As s ets

25.3

17.2

17.3

24.8

28.6

27.2

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Credit to deposit ratio increased marginally from 61.2 per cent in February 2011 to 61.6 per cent in February 2012

and credit to deposit plus borrowings ratio also followed similar trend. Investments to deposit ratio decreased
marginally to 27.2 per cent in February 2012 from 28.6 per cent in February 2011 and reflected banks
channelling of relatively less proportion of mobilised funds into investments (see Chart 7).

5.4

Credit Risk

5.4.1 Credit Portfolio Analysis

Gross loans and advances of the banking industry grew by 23.2 per cent in real terms at the end of February
2012 compared with a contraction of 3.5 per cent recorded in the same period in 2011. Credit to the private sector
also increased by 31.6 per cent in real terms as at end of February 2012 compared to the 0.4 per cent growth at
end February 2011 (see Table 3).
The composition of banks credit portfolio by economic institutions shows that the lowest proportion of loans and
advances was received by public enterprises and accounted for 4.4 per cent of gross loans and advances as at
February 2012, compared with 11.8 per cent recorded in February 2011. Loans to private enterprises accounted
for 75.6 per cent of gross loans in February 2012, up from 68.4 per cent recorded in February 2011. The share of
household loans in gross loans however decreased marginally to 15.5 per cent in February 2012 compared with
16.0 per cent in February 2011. Credit to government and public institutions constituted 4.6 per cent of gross
loans and advances in February 2012, an increase from 3.8 per cent registered in February 2011 (see Table 3).
Table 3: Gross Loans and Real Annual Growth of Credit
Feb-07

Feb-08

Feb-09

Feb-10

Feb-11

Feb-12

2,650.5

4,238.5

6,227.9

7,050.08

7,427.53

9,937.04

28.4

41.3

22.1

(0.9)

(3.5)

23.2

Private Sector Credit (GHm)

2,208.1

3,492.7

5,051.1

5,753.9

6,304.0

9,009.80

Real Growth (y-o-y)

40.8

39.7

20.2

-0.3

0.4

Gross Loans and Advances (GHm)

Real Growth (y-o-y)

31.6

Distribution of Gross Loans by Economic Sector ( percent )

Private Enterprises
Household Loans
Govt & Public Institutions
Public enterprises

Monetary Policy Report No. 5 Vol.2/2012

67.6
15.7
5.0
11.6

65.3
17.1
4.5
13.1

63.9
17.2
4.8
14.1

68.6
14.9
2.2
14.3

68.4
16.0
3.8
11.8

75.6
15.5
4.6
4.4

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The sectoral allocation of credit shows that Commerce & Finance continued to receive the highest proportion of

credit though in year-on-year terms its share of total credit declined from 30.6 per cent in February 2011 to 27.1
per cent in February 2012. The services sectors share of credit however improved from 22.6 per cent in February
2011 to 25.3 per cent in February 2012.
Mining and Quarrying, Electricity, Gas and Water, and Transportation, Storage and Communication sectors share
of credit improved, while the proportion of credit to Construction and Manufacturing sectors declined during the
review period. The proportion of total credit to Agriculture, Forest and Fishing sector remain the same (see Chart
8).
Chart 8: Sectoral Credit Allocation
8.0
7.7

Mi s cel l a neous

25.3
22.6

Servi ces
Tra ns p., Stor. & Commu.

3.8
4.1
27.1

Commerce a nd Fi na nce
El ect., Wa ter & Ga s

6.6

7.8
8.3

Cons tructi on

8.8

Ma nufa cturi ng
Mi ni ng & Qua rryi ng

30.6

9.7

11.9

3.9
2.6

Agri c, Fores t. & Fi s hi ng

0.0
Feb-11

5.6
5.6

10.0

20.0

30.0

40.0

Feb-12

5.4.2 Off-Balance Sheet Activities

Off-balance sheet items (contingent liabilities) grew by 29.3 per cent to GH3.2 billion as at February 2012
compared with a growth of 63.7 per cent in the corresponding period in 2011 (see Table 4).
Table 4: Contingent Liabilities

Contingent Liabilities (GH)

Growth (y-o-y)
Share in Total Liabilities (%)

Monetary Policy Report No. 5 Vol.2/2012

Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12

840.8 1,349.9 1,523.6 1,509.2 2,470.9 3,194.5
(8.1) 60.5 12.9
(0.9) 63.7 29.3
15.7 16.8 13.8 10.6 13.8 14.1

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5.4.3 Asset Quality

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The indicators of asset quality improved at end February 2012 relative to the same period last year. The
industrys Non-Performing Loan (NPL) ratio declined from 16.6 per cent at February 2011 to 13.7 per cent in
February 2012 (see Table 5).
The loss loan category of the total loan classifications continued to account for the highest proportion of banks
impaired assets. It accounted for 61.3 per cent of the impaired assets, while doubtful and substandard categories
accounted for 19.6 per cent and 19 per cent respectively at end February 2012. Loss loan category accounted for
60.4 per cent, followed by substandard 21.7 per cent, and doubtful loans 17.9 per cent in the same period of
2011.
The ratio of NPL net of provisions to capital of 10.6 per cent at end February 2012 was an improvement over the
February 2011 position of 12.2 per cent. Loan loss provision to gross loans ratio also improved from 9 per cent to
7.1 per cent over the same periods (see Table 5).
Table 5: Asset Quality
SUB-STD (GHm)
DOUBTFUL (GHm)
LOSS (GHm)
NPL (GHm)
NPL Ratio (%)
NPL Net of Provision to Capital (%)
Loan provision to Gross loan (%)

Feb-07
37.2
50.3
106.5
194.0
7.3
0.93
5.67

Feb-08
115.3
106.4
136.3
358.1
8.4
11.87
4.88

Feb-09
136.3
125.9
243.0
505.2
8.1
4.67
5.76

Feb-10
524.5
385.5
501.8
1,411.7
20.0
27.24
10.72

Feb-11
267.1
220.4
742.6
1,230.1
16.6
12.17
9.04

Feb-12
258.4
266.9
833.6
1,358.9
13.7
10.63
7.13

Table 6: Distribution of gross loans and NPLs by Borrower TYPE

Distribution of Gross Loans and NPLs By Borrower Type: February 2012
share in Total Credit
share in NPLs
a. Public Sector
8.8
8.8
i Central government
2.3
0.1
ii Public Institutions
1.6
0.7
iii Public Enterprises
4.9
8.0
b. Private Sector
91.2
91.2
i Private Enterprises
74.1
84.0
o/w Foreign
9.9
5.2
Indigeneous
64.2
78.9
ii Households
15.5
6.4
iii
Others
1.6
0.8
Grand Total
100
100

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The private sector received 91.2 per cent of total credit and accounted for 91.2 per cent of the total nonperforming loans as at the end of February 2012. Similarly, the public sectors share of total credit was 8.8 per
cent and contributed 8.8 per cent of non-performing loans as at February 2012 (see Table 6).
The data showed that sectors which received greater proportion of credit also accounted for a higher share of
NPLs. Commerce and finance, and services sectors together received 52.4 per cent of total credit and accounted
for 49.2 per cent of total NPLs at end February 2012 (see Chart 9).
Chart 9: Sectoral Distribution of Total Credit and NPLs as at February 2012
7.9
8.0

Mi s cel l a neous

17.0

Servi ces

25.3

4.3
3.8

Tra ns p., Stor. & Commu.

Commerce a nd Fi na nce

36.2

27.1
3.1

El ect., Wa ter & Ga s

9.7
9.2
7.8

Cons tructi on
Ma nufa cturi ng

8.8

Mi ni ng & Qua rryi ng

3.9

11.0

5.6
5.7
5.6

Agri c, Fores t. & Fi s hi ng

0.0

10.0

20.0

Sha re of Tota l Credi t

30.0

40.0

Sha re of Tota l NPL

The Mining and Quarrying sector continued to account for higher proportions of impaired loans to their gross
loans. However, the proportion of impaired loans of the mining and quarrying sector decreased significantly from
26 per cent in February 2011 to 19.7 per cent in February 2012. Similarly, the proportion of impaired loans in
other sectors declined except commerce and Finance and Transport, Storage, and Communication sectors (see
Chart 10).
Chart 10: Proportion of Loans Impaired in Each Sector
13.6
15.2

Mi s cel l aneous
Servi ces
Trans p., Stor. & Commu.
Commerce and Fi nance
El ect., Water & Gas
Cons tructi on

9.2

15.2
15.2
18.3
17.5
4.4

8.1
16.1

18.9
17.2

Manufacturi ng
Mi ni ng & Quarryi ng
Agri c, Fores t. & Fi s hi ng
0.0

19.7
13.9

5.0
Feb-11

Monetary Policy Report No. 5 Vol.2/2012

12.4

10.0

15.0

22.4
26.0

21.1

20.0

25.0

30.0

Feb-12

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5.5 Liquidity Indicators

T. 1 9 5 7

Liquidity in the banking sector remained strong as evidenced by increases in both broad and core measures of
liquidity in February 2012 relative to the same period in 2011. However, other measures such as liquid assets to
total deposits (both core and broad) declined marginally in year-on-year terms but remained relatively high (see
Table 7).
Table 7: Liquidity Ratios
Liquid Assets (Core) - (GH'million)
Liquid Assets (Broad) -(GH'million)
Liquid Assets to total deposits (Core)
Liquid Assets to total deposits (Broad)
Liquid assets to total assets (Core)
Liquid assets to total assets (Broad)

Feb-07

Feb-08

Feb-09

Feb-10

Feb-11

Feb-12

1,121.7
2,468.4
31.7
69.8
20.9
46.0

1,748.7
3,112.9
34.5
61.5
21.8
38.8

2,404.3
4,060.1
34.8
58.7
21.8
36.8

3,348.6
6,824.1
36.2
73.8
23.5
47.8

4,635.2
9,452.0
38.2
77.9
25.9
52.9

6,043.5
12,068.7
37.4
74.8
26.7
53.3

##
##
##
##
##
##

5.6 Capital Adequacy Ratio

The industrys capital adequacy ratio (CAR) as measured by the ratio of risk-weighted capital to risk-weighted
assets declined from 18.5 per cent in February 2011 to 17.4 per cent in February 2012 (see Chart 11). However,
the CAR was well above the 10 per cent prudential and statutory requirements.
Chart 11: Capital Adequacy Ratio Industry (%)
25.0

90.0
80.0

20.0

70.0

Percent

60.0

15.0

50.0
40.0

10.0

30.0
20.0

5.0

10.0
-

5.7

Feb-08

Feb-09

Feb-10

Feb-11

Feb-12

RWA/Total Assets
(RHS)

74.8

76.0

68.6

68.3

67.9

CAR

14.9

14.8

19.7

18.5

17.4

TIER 1 CAR

13.5

14.0

18.5

18.6

14.9

0.0

Profitability

5.7.1 Highlights from the Banks Income Statement

Indicators of profitability for the banking industry show some improvement in banks earnings performance for the
period ended February 2012. The banking sectors income before tax grew by 80.4 per cent to reach GH162.9
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million in February 2012. Similarly, the industrys net profit after tax increased significantly by 97.2 per cent in
February 2012 compared with a contraction of 10.5 per cent recorded in February 2011. The improvement in
earnings was due to significant growth in fees and commission and other income as well as a slower growth in
operating expenses. Growth in net fees and commission rose from 22.8 per cent in February 2011 to 40.1 per
cent in February 2012 while other income also posted significant increases (see Table 8).
The banking industrys interest expenses contracted by 4 per cent in February 2012 compared to a 32.4 per cent
contraction recorded in February 2011, reflecting improved macroeconomic conditions (see Table 8).
Table 8: DMBs Income Statement
DMBs' Income Statement Highlights
Feb-10
Feb-11
Feb-12
(GH 'million)
Interest Income
Interest Expenses
Net Interest Income
Fees and Commissions (Net)
Other Income
Operating Income
Operating Expenses
Staff Cost
Other operating Expenses
Net Operating Income
Total Provision (Loan losses, Depreciation & others)
Monetary Loss
Income Before Tax
Tax
Net Income
Gross Income

Feb-11
Feb-12
Y-on-y Growth (%)

355.8
(170.8)
184.9
64.9
121.3
371.1
(159.8)
(68.4)
(91.3)
211.3
(38.0)
(81.2)

337.6
(115.6)
222.0
79.7
47.5
349.2
(200.5)
(89.2)
(111.3)
148.8
(59.4)
0.9

377.7
(111.0)
266.7
111.6
87.2
465.5
(242.0)
(113.4)
(128.6)
223.5
(61.7)
1.1

(5.1)
(32.4)
20.1
22.8
(60.8)
(5.9)
25.5
30.3
21.8
(29.6)
56.1
-

11.9
(4.0)
20.1
40.1
83.5
33.3
20.7
27.2
15.5
50.3
4.0
-

92.1
(20.6)
71.5
541.9

90.3
(26.3)
64.0
464.8

162.9
(36.7)
126.2
576.5

(1.9)
27.9
(10.5)
(14.2)

80.4
39.6
97.2
24.0

5.7.2 Interest Margin and Spread

The ratio of gross income to total assets (i.e. assets utilisation) declined from 2.6 per cent in February 2011 to 2.5
per cent as at end February 2012. The banking industrys interest spread however increased from 1.5 per cent in
February 2011 to 1.6 per cent at the end of February 2012 (see Table 9).
5.7.3 Return on Assets and Return on Equity
The banking industrys return on assets (ROA) and the return on equity (ROE) increased from 22.2 per cent and
2.1 per cent at end February 2011 to 31.1 per cent and 3.3 per cent by end February 2012 respectively.

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5.7.4 Composition of Banks Income

NA

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T. 1 9 5 7

Interest income from loans which continues to be the main source of income for the banking industry constituted
45.6 per cent of total income in February 2012 compared with 48.3 per cent in February 2011. Investment income
share of 20 per cent of total income was below the 24.3 per cent recorded in February 2011. The share of
income from fees and commission improved from 17.1 per cent in February 2011 to 19.4 per cent in February
2012 (see Chart 12).
Table 9: Profitability Indicators (%)
Gross Yield
Int Payable
Spread
Asset Utilitisation
Interest Margin to Total Assets
Interest Margin to Gross income
Profitability Ratio
Return On Assets (%) Before tax
Return On Equity (%) after tax

Feb-07
2.3
1.0
1.3
15.5
1.3
50.4
19.4
31.1
2.7

Feb-08
2.6
0.9
1.7
16.0
1.2
46.2
29.6
35.0
2.9

Feb-09
3.3
2.0
1.2
20.2
1.2
35.1
14.3
27.7
3.0

Feb-10

Feb-11

3.4
2.3
1.2
3.8
1.3
34.1
13.2
42.2
3.1

2.6
1.0
1.5
2.6
1.2
47.8
13.8
22.2
2.1

Feb-12
2.4
0.8
1.6
2.5
1.2
46.3
21.9
31.1
3.3

Chart 12: Composition of Income (%)

100.0
90.0
80.0

Percent

70.0
60.0
50.0
40.0
30.0
20.0
10.0
-

Feb-08

Feb-09

Feb-10

Feb-11

Feb-12

8.8

13.2

22.4

10.2

15.1

Commissions & Fees

20.3

14.5

12.0

17.1

19.4

Loans

53.8

53.1

48.9

48.3

45.6

Investments

17.1

19.0

16.8

24.3

20.0

Other Income

5.8 Operational Efficiency

Indicators of operational efficiency broadly recorded some improvement relative to the same period last year. For
instance, cost to income declined from 86.4 per cent in February 2011 to 78.3 per cent in February 2012 and
operational cost to gross income decreased from 61.6 per cent to 59 per cent over the same period (see Chart
13).
Monetary Policy Report No. 5 Vol.2/2012

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Chart 13: Efficiency Indicators

100.0

T. 1 9 5 7

3.5

90.0

3.0

80.0

2.5

70.0
60.0

Percent

NA

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NK

2.0

50.0
1.5

40.0
30.0

1.0

20.0

0.5

10.0
-

Feb-08

Feb-09

Feb-10

Feb-11

Feb-12

Cost to i ncome

70.5

85.8

71.8

86.4

78.3

Operati onal Cost to gross i ncome

49.6

48.8

40.3

61.6

59.0

Cost to total assets (RHS)

1.9

2.9

2.7

2.2

2.0

Operati onal Cost to total assets

(RHS)

1.3

1.6

1.5

1.6

1.5

5.9 Banks Counterparty Relationships

5.9.1 Developments in Banks Offshore balances & External Borrowing
Banks offshore balances as at January 2012 registered a growth of 68.2 per cent compared with a contraction of
10.4 per cent in January 2011 (see Table 10).
Long-term external borrowings as a proportion of total external borrowing, increased from 27.4 per cent in
January 2011 to 31.4 per cent in January 2012 while short term foreign borrowings declined from 72.6 per cent in
January 2011 to 68.6 per cent in January 2012 though it represented the largest share of the banking industry
external borrowings (see Chart 14).
External borrowings as a proportion of total borrowings continued to decline as banks sourced for more domestic
borrowings. Classification of banks borrowings by source is provided in Chart 15.
Table 10: Developments in Banks Offshore Balances (%)
Offshore balances as %
to Networth
Monthly Growth in
Offshore balances (%)
Annual Growth in
Offshore balances (%)
Growth in Industry
Networth (%)
Monetary Policy Report No. 5 Vol.2/2012

Dec-09

Jan-10

Dec-10

Jan-11

Dec-11

Jan-12

81.52

78.93

52.41

52.44

60.20

67.43

19.60

(2.28)

5.03

3.88

(2.17)

16.03

57.44

64.56

(15.67)

(10.35)

50.56

68.17

58.50

23.66

31.16

34.93

31.09

30.79
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% of Total Borrowing

Chart 14: Distribution of Banks External Borrowings

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T. 1 9 5 7

80.00
70.00
60.00
50.00
40.00
30.00
20.00
10.00
2009

2010

2011

2012

Jan-09

Jan-10

Jan-11

Jan-12

% of Total Borrowing

Chart 15: Classification of Banks Borrowing by Source

70.00
60.00
50.00
40.00
30.00
20.00
10.00
2009

2010

2011

2012

Jan-09

Jan-10

Jan-11

Jan-12

6.1 Conclusion and Outlook

The analysis of the banking sectors balance sheet, P&L, and other prudential reports revealed that:

The banking industry was adequately capitalized, liquid and profitable.

The financial soundness indicators of the banking industry, measured in terms of earnings, portfolio
quality, liquidity, and capital adequacy remained strong.

Liquidity risks remained well-contained in the short- to medium term.

The declining trends in the banking sector NPLs is expected to enhance credit delivery.

The improvement in the non performing loans has culminated in credit expansion. However, the recent
depreciation of the cedi and the increase in money market rates may dampen credit recovery. In the short to
medium term, banks need to monitor their portfolio risks and manage their exposures to minimize the risks
inherent in the depreciation of the cedi.
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APPENDIX

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Appendix A1: Selected Indicators of the Banking Industry

Indicators of Concentration and Competition
Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12
62.8
56.3
55.6
52.0
48.8
46.1
44.6
51.6
50.9
48.4
46.9
44.3
40.5
40.2
981.2
948.4
838.0
746.6
675.5
622.1
592.9
1.01
1.00
0.98
0.95
0.89
0.80
0.79
Indicators of Financial Depth and Intermediation
Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12

Market Share (Top 5 banks)

Gini Concentration Index
Herfindahl Index
Variation Coefficient (VC)

Asset to GDP
Private Sector Credi/GDP
Total Credit to GDP
Deposits to GDP

20.5
7.6
10.0
13.6

23.2
9.5
11.4
15.3

26.6
11.6
14.0
16.8

30.1
13.8
17.0
18.9

30.9
12.7
15.2
20.0

Appendix A2: Balance Sheet (flow data)

Balance Sheet (flow data)

Assets
Credit

Feb-11
377,454.3

of which foreign currency

Investments
Foreign Assets
Total Assets
Share of Assets (flow)
Credit

31.3
11.0
13.0
21.3

32.4
13.0
14.2
23.1

Feb-12
2,509,508.5

346,185.1

1,169,891.3

1,577,456.5
336,807.1
3,591,714.6

1,038,472.0
758,718.2
4,756,875.6

10.5

52.8

of which foreign currency

9.6

24.6

Investments to total Assets

Foreign Assets

43.9
9.4

21.8
15.9

2,893,221.0

4,001,972.9

Liabilities
Deposits
of which foreign currency

Borrowings
Shareholders' Funds
Shareholders' Funds & Liabilities
Share of Liabilities (flow)
Deposits
of which foreign currency

Borrowings
Shareholders' Funds

Monetary Policy Report No. 5 Vol.2/2012

844,957.6

(29,848.8)
613,193.0
3,580,987.7

1,354,228.4

158,892.1
633,715.7
4,758,410.6

80.8

84.1

23.6

28.5

(0.8)
17.1

3.3
13.3

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