Banks’ investments in T-bills drop 12%

Banks’ investments in Treasury Bills declined from 81.0 percent in June 2016 to 69.6 percent in June 2017, according to the latest Financial Stability Report by the Bank of Ghana (BoG).

In the May 2017 report, banks investments in the short term securities declined from 79.0 percent in April 2016 to 72.0 percent in April 2017.

Many analysts believe the banks' investments in treasury securities-the largest proportion of its investments will reduce to about 65 percent by December 2017.

This has increased banks lending to private sector and households despite the high non-performing loans. The report noted that the share of securities (long-term investments) in total investment, however, increased from 16.1 percent to 26.3 percent during the same comparative period.

Banks’ investments in shares and other equities as a share of total investments rather declined from2.9 percent in June 2016 to 1.7 percent in June 2017.

The report explained further that banks’ off-balance sheet items (contingent liabilities) grew by 12.6 percent from GH¢6.52 billion in June 2016 to GH¢7.34 billion in June 2017, representing a pickup in trade finance and guarantees over the period.

The ratio of banks’ contingent liabilities to total banking sector liabilities, however, declined from 11.5 percent in June 2016 to 9.7 percent in June 2017 due mainly to the expansion of banks’ liabilities over the period under review.

On credit risk, domestic gross loans which stood at GH¢37.51 billion as at end June 2017, grew by 3.4percent year on year in real terms, following an 8.2 percent contraction in June 2016.

Real private sector credit followed a similar trend, growing by 2.6 percent after recording a negative growth rate of 8.2 percent a year earlier. Real credit to households contracted by 0.7 percent in June 2017 compared with a 2.3 percent contraction in June 2016.

The private sector remained the largest recipient of banks’ credit (both domestic and foreign)although its share of banks’ credit declined marginally from 87.4 percent in June 2016 to 86.9 percent in June 2017.

TheCommerce & Finance, Services, and Electricity, Gas & Water sectors remained the three largest in terms of outstanding credit balances in June 2017, with a combined share of total banking sector credit of 56.3 percent.

Outstanding credit balances allocated to the Commerce & Finance sector (the largest sector) was 25.7 percent by the end of the first half of 2017.

The Mining & Quarrying and the Agriculture, Fishing & Forestry sectors were

allocated the least shares of credit of 2.4 percent and 3.9 percent respectively. The share of credit to both sectors declined marginally over the one year period.

On asset quality, the banking sector indicators of asset quality pointed to a deterioration in the loan portfolio between June 2016 and June 2017, although the rate of growth (year-on-year) in the industry’s NPLs slowed down from82.5 percent in June 2016 to 30.7 percent in June 2017.