Increase in deposits reflects investor confidence in the banking sector – Yaw Lartey

Financial Advisory Leader of Deloitte Ghana, Yaw Lartey, says the steady increase in bank deposits largely demonstrates investor confidence is on the rise in the sector.

This follows the Bank of Ghana’s Statistical Bulletin report for May 2020 indicating that banks’ deposits from the sector were witnessing growth.

According to Mr Lartey, the increase also validates that businesses are gradually recovering in the wake some eased coronavirus induced restrictions.

“The increase in savings deposits over the last few months is attributable to a number of factors, and confidence in the banking sector is one of those factors. There has been increased confidence in the banking sector following banking sector reforms over the last two years,” Mr Lartey said in an interview with the B&FT.

He explained; “Beyond that, there are other factors such as uncertainty in the global and national economies as a result of the Coronavirus pandemic – which has caused investors in projects and companies to adopt a ‘wait and see’ attitude. Consequently, investors have opted to invest in safer assets like short-term deposits.”

The financial expert however noted other factors such as the decline in government securities also demonstrates investors have found it prudent to keep their funds in the banking sector as opposed to investing in government securities.

“The other factor that has led to an increase in savings deposits is the decline in returns on government securities. Returns on the 91-day Treasury bill, for instance, declined by about a percentage point from 14.2 percent as at end of February to 13.2 percent in May 2020. Investors found it prudent to keep their funds in the banking sector as opposed to investing in government securities,”

“In essence, confidence in the banking sector cannot be ruled out as one of the factors which caused an increase in savings deposits; but uncertainties in the economy as a result of the pandemic have caused a decline in real asset investment, and the decline in returns on government securities contributed to the increase in savings deposits,” he concluded.