Big drop in foreign currency deposits

More Ghanaians and businesses could be keeping their foreign currencies particularly US dollars outside the banking sector, the latest Macroeconomic and Financial Data of the Bank of Ghana (BoG) suggests.

According to the data, foreign currency deposits recorded a negative growth of -1.7 per cent at the end of May 2016.

The foreign currency deposits grew by 27.6, 17.9, 11.2 and 2.8 percent respectively in January, February, March and April 2016.

It is however unclear whether predictions by analysts and economists that the cedi will depreciate further against the US dollar is the reason behind the negative growth of foreign currency deposits. Already, Ecobank Research is projecting that the local currency will trade between GH¢3.97 and GH¢4.10 to one US dollar in the next two months.

According to the report, total deposits of the banking sector however grew from GHC41.1 billion in April 2016 to GHC42.7 billion at the end of May 2016, approximately 19.3 percent growth.

Meanwhile, liquidity continued to remain tight as it grew only by 16.8 percent in May 2016 against 29.6 percent recorded in January 2016. Liquidity has been declining since January this year. February recorded 19.3 percent, March 18.1 percent and April 16.1 percent.

The report further stated that total assets of the banking industry stood at GH¢66.1 billion compared with GH¢64.6 billion at the end of April 2016.

Loans and advances inched up slightly to GHC31.4 billion in May 2016 from GHC30.8 billion in April 2016.

Demand Deposits, largely current and savings accounts grew substantially from 23.8 percent in April 2016 to 31.7 percent in May 2016. The impressive growth reverses the first quarter trend where banks were struggling to mobilise cheap funds.

Savings and Time Deposits popularly called fixed deposits however recorded a 24.1 percent growth at the end of May 2016 compared with 24.2 percent growth in April 2016 and 24.0 percent growth in quarter one 2016.

Growth of currency outside banks increased to 14.6 percent in May 2016, up from 13.5 percent recorded in April 2016. The banking sector’s capital adequacy ratio dropped from 17.5 percent in April 2016 to 16.6 percent in May 2016.

Non-performing loans however stood at 19.3 percent at the end of May 2016, higher than the 18.6 percent recorded in April 2016.

Banks in Ghana made a provision of GHC231.52 million as bad debt for the first quarter of this year. This was compared to GHC140.21 million in the same period of 2015, a 65.13 percent growth. The provision includes loan losses, depreciation and others.

The performance affected their bottom line as they registered a negative growth of 1.0 percent in the first quarter of 2016 according to the Bank of Ghana Financial Stability.

According to the report, the industry’s net profit after tax also contracted by 2.6 percent in March 2016 compared with 24 percent growth in March 2015.