Ghanaian banks well-positioned to absorb risk from borrowers – Fitch

Banks operating in Ghana are well-positioned to absorb an increase in asset quality from borrowers in the wake of the Coronavirus pandemic, according to ratings agency, Fitch.

The UK-based firm pointed out in a report that the coronavirus pandemic’s induced shocks to the financial sector will complement legacy asset problems.

“…But strong operating profitability and improved capitalization, meant banks are on a sound footing to absorb the risks.”

“Pandemic-induced defaults will add to legacy asset-quality issues linked to loss-making state-owned energy companies and bulk oil distribution companies that suffered from currency depreciation and delays in government subsidy payments,” the firm explained.

“The sector entered the crisis strengthened by recent initiatives led by the government and the Bank of Ghana (BoG) that addressed energy sector asset quality issues, raised minimum capital requirements and resulted in consolidation,” it added.

Meanwhile, figures released by the Bank of Ghana showed the country’s growth rate in 2020 shrunk to 2 percent as against 6.5 percent recorded in 2019.

The slump has been attributed to the coronavirus lockdowns associated with disruption of global supply chains, trade and financial flows in key sectors.

But Fitch points out that the slowdown of the global economy has since weakened the repayment capacity of households and businesses despite the institutions of debt-relief measures to customers which barely impacts on asset quality.