Non-performing loans, a major risk for the banking sector – John Awuah
Ghana Bankers Association chief executive John Awuah said the growth of deficiencies is a challenge for the banking sector.
The CEO was referring to the effects of non-performing loans on the banking sector, especially now, during the Covid-19 pandemic.
According to him, a recent slowdown in growth figures to 16.4% against 15.3% is a significant risk for the banking sector.
Speaking on JoyNews’ PM Express, John Awuah explained that with several bank-backed industries barely recovering from the pandemic, it means “cash flow projections have not been at the levels we planned during the asset restructuring”.
“That means where the banks are showing good earnings, you’ll see the number of writedowns in 2021 wasn’t that impressive. Yes, in the third quarter it’s down to around 16.4, but we’re talking about the last year or 2020 when we were talking about 15.3 or something in that region.
“So any growth in impairments is a challenge for the sector and that means the risk to the banking sector in terms of asset quality is real,” he said.
He further explained that with an increase in the number of write-downs to 16.4%, in real terms “It means that for every 100 Ghanaian cedis that the bank gives out as a loan, there is this possibility or probability that she will not be able to recover about 17 Ghanaian cedis from it which is significant.
“When you give your deposit to the bank, you want your deposit plus any interest that might have accrued, so if the banks are going to lend your deposit and have that probability of their inability to recover 16 and a half percent of 100 ghana cedis, it is important and that is why the risk of depreciation [is still high].”