The banking sector report for first-half of the year has shown that customers are now reposing confidence in the banking sector – after a difficult 2018 which led to a lot of panic-withdrawals following the banking sector cleanup.
The Bank of Ghana (BoG) report on activities of the sector shows that banks’ deposits have increased by 22.3 percent to GH¢75.57billion for end-June 2019, as deposits outperformed the previous year’s performance.
The situation looks more positive when disaggregated into domestic and foreign deposits. Domestic deposits formed the largest component of total deposits as it grew by 22.5 percent on an annual basis to GH¢75.2billion, compared with 13.4 percent growth a year ago. The situation was however different at the end of last year, when banks’ deposit growth dipped to 17.4 percent in December from 18.4 percent the previous month.
Foreign currency deposits also grew by 37.9 percent in June 2019 to GH¢21.63billion against 6.8 percent growth recorded in June 2018, partly attributed to depreciation of the Ghana cedi.
The Bank of Ghana says the growth in deposits can be attributed to nothing but “increasing confidence and stability in the banking sector following the reforms”.
Financial Analyst at the University of Cape Coast, Prof. John Gatsi, has however cautioned that the figures should be further disaggregated to determine whether the growth is coming from new depositors or existing ones, before such a conclusion is drawn by the central bank.
“We need to know where these depositors are coming from. Are they the same customers of the banks who are increasing their deposit base? So, using the deposit level alone without disaggregating to see whether it is coming from new customers’ deposits does not actually speak to the issues we are dealing with.
“It was the panic resulting from the approach of the clean-up that led to a deterioration in the deposits. So, normally, when these things happen it will come to a time when people realise they can no longer keep their monies with them. So the way we should measure it is to consider whether banks have restored robust capital base and strong corporate governance arrangements, and whether the regulator is actually doing the right thing. We should look at it holistically,” he said in an interview with the B&FT.
Besides the growth in deposits, the report also indicated that profitability of banks experienced upward movement and improved compared to same period last year. The industry recorded an after-tax profit of GH¢1.67billion, representing a year-on-year growth of 36.3 percent compared with 21.7 percent in the same period last year.
The strong profit performance, the report said, was underpinned by higher growth of net interest income. Net interest income grew by 20.7 percent, reflecting both higher interest income from investments and lower interest expenses from reduced borrowings.