Banks profit growth declines

Figures released by the Central Bank on the banking sector reveal that for the first six months of 2013 the industry’s growth in profit after tax has declined significantly.

The industry’s net profit after tax of GH¢606.5 million saw a growth of 46.7 percent in June 2013 compared with 74.9 percent growth in June 2012. Commission and fees (net) growth slowed to 21.2 percent at end June 2013 from 25.1 percent in June 2012 while other income however declined by 16.1 percent.

The banking sector’s income before tax of GH¢811.9 million, in terms of year-on-year growth recorded an increase of 58.4 percent in June 2013 compared with 54.6 percent in the same period in 2012.

Interest income of GH¢2.06 billion in terms of year-on-year growth witnessed 70.8 percent increase at end June 2013 compared with 13.0 percent growth recorded in the corresponding period in 2012 while interest expenses of GH¢670.5 million showed an increase of 89.9 percent in June 2013 compared with a decline of 3.7 percent in June 2012.

The ratio of gross income to total assets (i.e. assets utilization) improved to 8.8 percent in June 2013 from 7.4 percent June 2012. Interest spread however widened to 5.7 percent in June 2013 from 4.9 percent in June 2012.

The banking industry’s return on equity (ROE) increased to 37.6 percent at end June 2013 from 33.5 percent at end June 2012. Similarly, return on assets (ROA) increased to 4.2 percent in June 2013 from 3.6 percent in June 2012.

Interest income from loans which continued to be the main source of income for the banking industry constituted 50 percent of total income in June 2013 compared with 44.4 percent in June.

Investment income share of 26.3 percent of total income was an improvement over the 22 percent recorded in June 2012. The share of commission and fees in total income declined to 15.2 percent at end June 2013 from 18.6 percent in June 2012 The industry’s capital adequacy ratio (CAR), as measured by the ratio of risk-weighted capital to risk-weighted assets, increased to 15.8 percent at end of June 2013 from 13.7 percent at end June 2012.

The improvement in the CAR reflects decline in the pace of credit expansion and increase 10 in banks’ investment portfolio. The CAR was well above the 10 percent prudential and statutory requirements.

The balance sheet size of the banking sector as at June 2013 expanded by 24.3 to GH¢30.58 billion compared with 26.2 percent growth recorded in the same period in 2012. The increase in total assets reflected mainly in domestic assets. Domestic assets increased by 29.8 percent by the end of June2013 compared with the 25.6 percent growth registered in the same period in 2012.

Foreign assets however declined by 19.1 percent in June 2013 compared with 31.5 percent growth for the same period in 2012.

Gross loans and advances of GH¢15.26 billion as at June 2013 represented a year-on-year growth of 36.7 percent compared with 44.1 percent growth for the same period in 2012. Net loans and advances amounted to GH¢13.68 billion, representing a year-on-year growth of 35.4 percent in June 2013 compared with a growth rate of 48 percent recorded in June 2012. Banks’ investment portfolio (bills and securities) grew, in year-on-year terms, by 33.2 percent to reach GH¢8.48 billion by the end of June 2013 compared with a growth of 4 percent at end June 2012.

Deposit liabilities, which continues to be the main source of banks’ funding, grew by 13.3 percent to GH¢20.43 billion in June 2013 compared with 32.2 percent growth registered in June 2012. Total borrowings also grew in year-on-year terms by 96.5 percent to GH¢3.59 billion in June 2013 compared with a 2.9 percent decline in June 2012.

Paid-up capital increased by 18.2 percent to GH ¢2.19 billion at end June 2013 compared with the 22.8 percent growth in June 2012.

The banks’ balance sheet structure at end June 2013 shows that investments’ (in both bills and securities) share in total assets increased to 27.7 percent at end June 2013 from 25.9 percent in June 2012. The share of net loans & advances in the banks’ assets of 44.7 percent in June 2013 was an increase from the 41.1 percent recorded in June 2012.6.

Total deposits accounted for 66.8 percent of total liabilities at end June 2013 compared with 73.3 percent recorded in June 2012 while the proportion of shareholders’ funds in total liabilities increased to 14.6 percent at end June 2013 from 13.2 percent recorded at end June 2012. This suggests that 14.6 percent of the banking sector assets are backed by equity. The share of total borrowings in total liabilities also increased to 11.7 percent at June 2013 from 7.4 percent registered in June 2012.

Banks’ investment in securities (long term investments) share in total investment increased to 41.8percent in June 2013 from 36.6 percent in June 2012. However, investment in treasury bills (short term investments) as a share of total investment decreased to 56.2 percent in June 2013 from 61.1percent in June 2012.

Credit to deposits ratio increased to 74.7 percent at end June 2013 from 62 percent at end June 2012 and credit to deposit & borrowings ratio also followed a similar trend. Investments to deposit ratio also increased to 41.5 percent at end June 2013 from 35.3 percent at end June 2012.