It has emerged that the year 2019 recorded a slow growth rate among commercial banks amid slow deposits mainly as a result of the banking and financial sector clean-up undertaken by the Bank of Ghana.
The BoG at the time claimed those drastic measures were the only way to save depositors and customers and further strengthen the sector.
According to the BoG's latest banking sector report, deposits as the main source of funding for the banking industry, stood at 17.1 percent in October 2019, marginally lower than the 20.7 percent increase in the previous year.
The central bank report means that although bank total deposits still grew in the period under review, the rate of growth fell short of what was achieved a year earlier.
The total banking sector deposits increased to GH¢78.90 billion by GH¢11.51 billion in October 2019 from GH¢67.38 billion in October 2018. Despite the slowdown in growth rate, the Bank of Ghana maintains that the sheer growth points to a renewed confidence in the banking sector following the reforms.
According to the report, domestic deposits grew at the same pace as total deposits to GH¢78.50 billion in October 2019 from GH¢67.04 billion in the previous year, while deposits of non-residents remained small at GH¢397.70 million from GH¢342.10 million.
The foreign currency component (denominated in Ghana Cedis) of total deposits, on the other hand, recorded a higher growth of 22.4 percent in October 2019 to GH¢20.79 billion compared with a growth of 13.7 percent a year ago.
The report revealed that as of October 2019, banks in the country made a total profit of GHS2.83 billion which was a 45.3 percent increase in the figure recorded same period in 2018.
The regulator attributes this increase in profitability in the banking sector to the reforms it implemented over the last two years.
“The industry's balance sheet posted a strong performance reflected by robust growth in total assets funded by sustained growth in deposits and increased capital levels relative to last year.
Similarly, the industry's income statement recorded an impressive year-on-year increase in profit-after-tax on the back of stronger growth in revenue lines compared to operating expenses.
Private sector credit growth rebounded during the period under review, enhancing financial intermediation,” the Bank of Ghana commented in the report.
In general, banks' total assets grew by more than 13 percent to GH¢121 billion in October 2019.
Of this, the stock of domestic assets increased by over 16 percent to GH¢111.5 billion in October 2019, while foreign assets reduced by 7.7 percent from the reduction in banks' placements abroad.
Domestic assets remained the largest component in total assets with the share increasing to 92.2 percent in October 2019.
Deposits, the main source of funding for the banking industry, grew by 17.1 percent in October 2019, marginally lower than the 20.7 percent increase in the previous year.
Total banking sector deposits increased to GH¢78.9 billion in October 2019 which the Bank of Ghana believes is due to the renewed confidence in the banking sector following the reforms.
The BoG since 2017 has been implementing a number of reforms it insists will strengthen the banking sector. These reforms included the introduction of an increased minimum capital requirement which is now pegged at GH¢400 million.
Other reforms have evolved around loan reclassification and loan write-offs. These reforms among others have led to the regulator revoking the license of nine banks which felled foul of the regulator's requirement.
The banks include UT, Capital, Beige, Royal Bank, Construction Bank, Unibank, Sovereign, Heritage and Premium banks.