The rating agency, Moody’s, warns Ghanaian banks against “difficult times” this year in terms of declining revenues. A situation due to a steady slowdown in growth of bank loans and advances in 2017.
Moody’s notes that loans and advances have just increased by 5,9% in 2017, versus 18,3% in 2016 and 24,9% in 2015, in its latest report published by the rating agency on the banking sector in Ghana.
“We expect that weak loan growth will reduce the revenue of Ghanaian banks, which will hurt their efficiency ratios and profitability,” said Akintunde Majekodunmi, vice president and banking analyst at Moody’s.
As a reminder, the country’s banks have significantly expanded their loan portfolios in 2014 and 2015, supported by robust economic growth. However, Ghana’s operating environment has deteriorated significantly in 2016, with real GDP growth having slowed to 3,5% versus 7,7% on average
The slowdown in loan growth will reduce interest income from loans (44,9% of total revenue in October 2017 vs. 50,4% in October 2016) and fee and commission income related to loans, reducing revenue from loans. exploitation of banks.
Also according to Moody’s, the high concentration risks will continue to worsen the risks associated with bank assets: the trade and finance, services and electricity, water and gas sectors contributed to 61% of total unproductive loans in October 2017.
However, the slowdown in loan growth is likely to dampen the formation of new NPLs in 2018 and 2019, due to the decline in new untested loans in the overall 2017 loan portfolio.
