1

+

p




Financial Stability Report

5.0 Introduction

5.0.1 The volatility in the financial markets of emerging economies (EMEs) remained with tighter
external financial conditions, particularly in more vulnerable EMEs. Consequently, monetary policy
stance tightened in most EMEs worsening growth prospects.

5.0.2 The domestic economy faces possible slowdown in economic activity on account of rising
inflation, local currency depreciation and softening of both consumer and business confidence. The
current economic developments have implications for the health of the financial sector.

5.0.3 The banking sector however continues to be healthy with improved financial soundness
indicators, measured in terms of earnings, portfolio quality, liquidity, and capital adequacy.

5.1 Credit Conditions Survey

5.1.1 Loans or credit lines to Enterprises
Credit stance on loans and advances worsened during the survey period with net tightening of credit
for all loan types. Banks tightened credit stance on loans or credit lines to Enterprises as at end
March 20124 (17.93 % as of January 2014 survey round compared with 19.75% at this survey round
(See Chart 1). Margin on average and riskier loans, high non interest cost and additional collateral
requirements were the main contributing factors for the tightening of credit stance for enterprises.
Other factors include deteriorating near term macroeconomic environment, monetary policy rate
hikes and high cost of funds.






Monetary Policy Report

B
A
N
K
O
F
G
H
A
N
A
E
S
T
. 1 9
5
7
VOLUME 5 NO. 2 March 2014
2
-40
-20
0
20
40
60
80
0
7
Q
4
0
8
Q
1
M
a
y
-
0
8
0
8
Q
2
0
8
Q
3
0
8
Q
4
0
9
Q
1
0
9
Q
2
A
u
g
-
0
9
O
c
t
-
0
9
J
a
n
-
1
0
M
a
r
-
1
0
J
u
n
-
1
0
A
u
g
-
1
0
O
c
t
-
1
0
J
a
n
-
1
1
M
a
r
-
1
1
M
a
y
-
1
1
J
u
l
-
1
1
S
e
p
-
1
1
N
o
v
-
1
1
J
a
n
-
1
2
M
a
r
-
1
2
M
a
y
-
1
2
J
u
l
-
1
2
O
c
t
-
1
2
J
a
n
-
1
3
A
p
r
-
1
3
J
u
n
-
1
3
A
u
g
-
1
3
O
c
t
-
1
3
J
a
n
-
1
4
F
e
b
-
1
4
N
P
R

(
%
)
Index, a rise denotes tightening

Chart 1: Overall Credit Stance

Notes: (NPR) -Net percentage refers to the difference between the sum of the percentages for tightened considerably and
tightened somewhat and the sum of the percentages for eased somewhat and eased considerably. The net percentages for the
questions related to the contributing factors are defined as the difference between the percentage of banks reporting that a given
factor contributed to a tightening and the percentage reporting that it contributed to an easing

Chart 2: Enterprise Credit Stance
-60
-40
-20
0
20
40
60
80
0
7
Q
4
0
8
Q
1
M
a
y
-
0
8
0
8
Q
2
0
8
Q
3
0
8
Q
4
0
9
Q
1
0
9
Q
2
A
u
g
-
0
9
O
c
t
-
0
9
J
a
n
-
1
0
M
a
r
-
1
0
J
u
n
-
1
0
A
u
g
-
1
0
O
c
t
-
1
0
J
a
n
-
1
1
M
a
r
-
1
1
M
a
y
-
1
1
J
u
l
-
1
1
S
e
p
-
1
1
N
o
v
-
1
1
J
a
n
-
1
2
M
a
r
-
1
2
M
a
y
-
1
2
J
u
l
-
1
2
O
c
t
-
1
2
J
a
n
-
1
3
A
p
r
-
1
3
J
u
n
-
1
3
A
u
g
-
1
3
O
c
t
-
1
3
J
a
n
-
1
4
F
e
b
-
1
4
N
P
R

(
%
)
Small and Medium Enterprises Large Enterprises
Index, a rise denotes tightening



3

5.1.2 Loan Demand
Loans request for fixed investment and inventories and working capital showed decreases (see Chart
3a and Chart 3b) while request for debt restructuring increased. Large enterprises and SMEs demand
for credit decreased and this reflected in decreases for all loan types, except on short-term.

Chart 3a: Usage of credit
-10
-5
0
5
10
15
20
25
30
35
40
Fixed Investment Inventories and
working capital
Debt restructuring Changes in terms on
loans to corporates
Jan-12 Mar-12 May-12 Jul-12 Oct-12 Jan-13
Apr-13 Jun-13 Aug-13 Oct-13 Jan-14 Feb-14
Index, a rise denotes tightening


Chart 3b: Enterprise Demand for Credit
-20
-10
0
10
20
30
40
50
Small and Medium Enterprises Large Enterprises Short term Long term
Index, a rise denotes increase in demand

Notes: The net percentages for the questions on demand for loans are defined as the difference between the sum of the percentages for
increased considerably and increased somewhat and the sum of the percentages for decreased considerably and decreased
somewhat.

4

5.2 Loans to households for house purchase

Banks maintained tight credit stance on loans to households for house purchase despite improvement
in non interest loan costs. Margins on average and riskier loans as well as additional security
requirements were employed to tighten credit for mortgages (see chart 4).

Chart 4: Credit Stance on Households Credit
-40
-20
0
20
40
O
c
t
-
1
0
J
a
n
-
1
1
M
a
r
-
1
1
M
a
y
-
1
1
J
u
l
-
1
1
S
e
p
-
1
1
N
o
v
-
1
1
J
a
n
-
1
2
M
a
r
-
1
2
M
a
y
-
1
2
J
u
l
-
1
2
O
c
t
-
1
2
J
a
n
-
1
3
A
p
r
-
1
3
J
u
n
-
1
3
A
u
g
-
1
3
O
c
t
-
1
3
J
a
n
-
1
4
F
e
b
-
1
4
N
P
R

(
%
)
Overall Loans for house purchase Consumer credit and other lending
Index, a rise denotes tightening



5.2.1 Loan demand
Households demand for credit for mortgages increased but their demand for consumer loans
decreased.

5.2.2 Consumer credit and other lending to households

Household access to consumer credit worsened on account of margin on average loans and security
requirements. Banks tightened conditions for consumer credit as at the end of February 2014 (see
Chart 4). The net tightening of credit stance for consumer credit was implemented through
tightening of margins on average and riskier loans (See Chart 5).


5

Chart 5: Measure of Tightening/Easing
-15
-10
-5
0
5
10
15
20
25
30
O
c
t
-
1
0
J
a
n
-
1
1
M
a
r
-
1
1
M
a
y
-
1
1
J
u
l
-
1
1
S
e
p
-
1
1
N
o
v
-
1
1
J
a
n
-
1
2
M
a
r
-
1
2
M
a
y
-
1
2
J
u
l
-
1
2
O
c
t
-
1
2
J
a
n
-
1
3
A
p
r
-
1
3
J
u
n
-
1
3
A
u
g
-
1
3
O
c
t
-
1
3
J
a
n
-
1
4
F
e
b
-
1
4
N
P
R

(
%
)
Your banks margin on average loans Security / collateral requirements
Your banks margin on riskier loans
Index, a rise denotes tightening


5.3 BANKING SECTOR STABILITY ANALYSIS

5.3 Developments in Banks Balance Sheet
Total assets of the banking grew by 39.8 percent to GH39.13billion as at end February 2014
compared with 23.7 percent growth recorded in February 2013. Domestic assets component of total
assets of GH35.97billion showed an increase of 38.5 percent by end of February 2014 compared
with 28.3 percent growth recorded for the same period in 2013. Foreign assets of GH3.16 billion
also grew by 56.4 percent in February 2014 compared with 14.9 percent decline for the
corresponding period in 2013 (see Table 1).

Net loans and advances of GH16.67 billion as at end February 2014 represented an annual growth
of 36.6 percent compared with 36.9 percent growth recorded in February 2013. Banks investment
portfolio (bills and securities) rose, in year-on-year terms, by 49.7 percent to reach GH11.50 billion
by the end of February 2014 compared with a 24.9 percent growth at the end of February 2013 (see
Table 1).

6
The banking sector total deposits liabilities as at end February 2014 was GH25.06 billion and
showed an annual growth of 29 percent compared with 20.4 percent growth in February 2013.
Banks borrowings however registered an increase of 105 percent to GH5.37 billion in February
2014 compared with 39.1 percent growth recorded in the same period in 2013. The growth in banks
borrowings was driven mainly by short term foreign borrowings (see Table 1).

Banks paid up capital also showed an annual growth of 10.9 percent to GH2.41 billion by the end
of February 2014, compared with 31.6 percent growth in February 2013 (see Table 1). Shareholders
fund similarly expanded, in year-on-year terms, by 37.3 percent to GH5.87 billion at the end of
February 2014 compared with a 36.1 percent growth recorded in the same period in 2013.

Table 1: Key Developments in Banks Balance Sheet

Shares
Feb-12 Feb-13 Feb-14 Feb-13 Feb-14 Feb-14
TOTAL ASSETS 22,625.0 27,996.1 39,128.5 23.7 39.8 100.0
A. Foreign Assets 2,376.1 2,021.8 3,161.8 (14.9) 56.4 8.1
B. Domestic Assets 20,248.9 25,974.3 35,966.7 28.3 38.5 91.9
Investments 6,150.6 7,680.5 11,496.5 24.9 49.7 29.4
i. Bills 3,868.7 3,767.2 7,215.1 (2.6) 91.5 18.4
ii. Securities 2,156.5 3,756.1 3,935.8 74.2 4.8 10.1
Advances (Net) 8,912.0 12,200.5 16,669.1 36.9 36.6 42.6
of which Foreign Currency 3,197.6 3,836.4 6,351.6 20.0 65.6 16.2
Gross Advances 9,937.0 13,529.2 18,425.1 36.1 36.2 47.1
Other Assets 893.1 994.0 1,430.7 11.3 43.9 3.7
Fixed Assets 591.7 686.1 960.6 16.0 40.0 2.5
TOTAL LIABILITIES AND CAPITAL 22,625.0 27,996.1 39,128.5 23.7 39.8 100.0
Total Deposits 16,141.4 19,431.5 25,060.1 20.4 29.0 64.0
of which Foreign Currency 4,675.1 5,374.8 7,065.8 15.0 31.5 18.1
Total Borrowings 1,883.1 2,618.9 5,368.6 39.1 105.0 13.7
Foreign Liabilities 1,334.3 1,626.8 3,638.3 21.9 123.6 9.3
i. Short-term borrowings 365.9 778.2 2,698.6 112.7 246.8 6.9
ii. Long-term borrowings 403.1 375.9 563.4 (6.8) 49.9 1.4
iii. Deposits of non-residents 565.3 472.7 376.3 (16.4) (20.4) 1.0
Domestic Liabilities 18,134.2 22,081.9 29,578.8 21.8 34.0 75.6
i. Short-term borrowing 821.9 1,235.2 1,852.2 50.3 49.9 4.7
ii. Long-term Borrowings 292.1 229.5 254.5 (21.4) 10.9 0.7
iii. Domestic Deposits 15,576.1 18,958.8 24,683.8 21.7 30.2 63.1
Other Liabilities 1,382.1 1,586.7 2,830.0 14.8 78.4 7.2
Paid-up capital 1,651.8 2,173.4 2,410.8 31.6 10.9 6.2
Shareholders' Funds 3,139.7 4,273.9 5,869.6 36.1 37.3 15.0
Key Devts in DMBs' Balance Sheet
Y-on-Y Growth (%)



5.3.1 Asset and Liability Structure of the Banking Industry
Net advances constituted 42.6 percent of banks assets in February 2014 compared with 43.6 percent
in February 2013. The decrease in the share of net loans revealed a shift in banks preference for
investment in government bills and securities, which represented 29.4 percent of banks assets in
February 2014 compared with 27.4 percent in February 2013 (see Table 2).
7


Table 2: Asset and Liability Structures of the Banking Sector
Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14
Components of Assets (In Percent of Total)
Cash and Due from Banks 20.88 21.81 21.82 23.46 25.9 26.7 22.9 21.8
Investments 25.33 17.25 17.34 24.76 28.6 27.2 27.4 29.4
Net Advances 45.84 49.69 52.55 43.11 36.4 39.4 43.6 42.6
Other Assets 4.49 7.91 4.96 5.40 6.2 3.9 3.6 3.7
Fixed Assets 3.40 3.29 3.19 3.17 2.8 2.6 2.5 2.5
Components of Liabilities (In Percent of Total)
Total Deposits 65.8 63.2 62.8 64.8 67.9 71.3 69.4 64.0
Total Borrowings 11.9 12.7 13.9 12.3 9.6 8.3 9.4 13.7
Other Liabilities 9.8 12.3 9.7 9.3 7.9 6.1 5.7 7.2
Shareholders' Funds 11.8 11.0 13.1 13.3 14.0 13.9 15.3 15.0


Total deposits share of 64 percent of total liabilities at end February 2014 was lower than the 69.4
percent recorded in February 2013 and showed banks declining efforts at intermediation. The
proportion of shareholders funds in total liabilities declined marginally to 15 percent as at February
2014 from 15.3 percent in February 2013. However, the share of banks borrowings as a proportion
of total liabilities increased to 13.7 percent as at February 2014 from 9.4 percent in February 2013
(see Table).

5.3.2 Share of Banks Investments
Chart 6 shows the distribution of the banks investment portfolio between February 2006 and
February 2014.

Chart 6 Banks Investment (%)
Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14
Bills/Total Investments 48.2 40.4 33.9 59.9 57.2 63.4 62.9 49.0 62.8
Securities/Total Investments 49.9 58.6 64.8 26.7 41.1 30.8 35.1 48.9 34.2
Shares & Other Equities/Total
Investments
1.9 1.0 1.4 13.3 1.7 5.8 2.0 2.0 3.0
-
10.0
20.0
30.0
40.0
50.0
60.0
70.0

8

Banks investment in securities as a share of total investment decreased to 34.2 percent in February
2014 from 48.9 percent in February 2013. Investment in treasury bills as a share of total investment
however increased to 62.8 percent in February 2014 from 49 percent in February 2013. Banks
investments in shares and other equities as a share of total investment also increased marginally to 3
percent as at February 2014 from 2 percent as at February 2013 (see Chart 6).

Chart 7: Portfolio Allocation (%)
Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14
Investments to Deposit 41.7 38.5 27.3 27.6 38.2 42.1 38.1 39.5 45.9
Credit/Deposit + Borrowings 65.3 63.5 69.7 73.7 64.1 53.6 55.1 61.4 60.6
Credit to Deposit 73.6 75.0 83.7 90.0 76.2 61.2 61.6 69.6 73.5
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
P
e
r
c
e
n
t


Credit to deposits ratio increased to 73.5 percent in February 2014 from 69.6 percent in February
2013 and credit to deposit plus borrowings ratio however declined to 60.6 percent in February 2014
from 61.4 percent in February 2013. However, investments to deposit ratio increased to 45.9 percent
in February 2014 from 39.5 percent in February 2013 (see Chart 7).


5.4 Credit Risk

5.4.1 Credit Portfolio Analysis

Real total loans and advances of the banking industry grew, in year-on-year terms, by 19.4 percent at
the end of February 2014 compared with 23.3 percent growth recorded in the same period in 2013.
Credit to the private sector also grew by 18.9 percent at end of February 2014 compared with the
20.5 percent growth at the end of February 2013. Credit to the households also grew by 17.1 percent
9
in February 2014 compared with 35.9 percent growth recorded in the same period in 2013 (see Table
3).
The composition of banks credit portfolio by economic institutions showed that the Government
and public institutions received 4.8 percent of total credit at end February 2014 compared with 8
percent recorded in February 2013. Credit to private enterprises however accounted for 76.1 percent
of gross loans in February 2014, compared with 69.9 percent recorded in February 2013. The share
of household loans in gross loans decreased to 15.5 percent in February 2014 from 17.1 percent in
February 2013. Credit to public enterprises accounted for 3.6 percent of gross loans and advances in
February 2014, compared with 5 percent registered in February 2013 (see Table 3).
Table 3: Gross Loans and Real Annual Growth of Credit
Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14
Gross Loans and Advances (GHm) 2,650.5 4,238.5 6,227.9 7,050.08 7,427.53 9,937.04 13,529.15 18,425.14
Real Growth (y-o-y) 28.4 41.3 22.1 (0.90) (3.49) 23.16 23.32 19.41
Private Sector Credit (GHm) 2,208.1 3,492.7 5,051.1 5753.86 6304.03 9,009.79 11,984.87 16,256.55
Real Growth (y-o-y) 40.81 39.72 20.18 -0.28 0.36 31.57 20.49 18.94
Households Loans (GH) 415.4 726.4 1,074.2 1,053.2 1,187.2 1,537.42 2,307.34 3,081.71
Real Growth (y-o-y) 25.7 54.5 22.9 (14.2) 3.3 19.2 35.9 17.1
Private Enterprises 67.6 65.3 63.9 68.6 68.4 75.6 69.9 76.1
Household Loans 15.7 17.1 17.2 14.9 16.0 15.5 17.1 15.5
Govt & Public Institutions 5.0 4.5 4.8 2.2 3.8 4.6 8.0 4.8
Public enterprises 11.6 13.1 14.1 14.3 11.8 4.4 5.0 3.6
Distribution of Gross Loans by Economic Sector ( percent )


The Commerce & Finance sector received the highest amount of credit, accounting for 25.1 percent
as at February 2014 compared with 27.6 percent in February 2013. Credit allocation to the services
sector, and Commerce & Finance sector constituted 50.1 percent of total credit as at February 2014
compared with 55.4 percent in February 2013. Credit allocation to other sectors including
Electricity, Gas & Water, Mining & Quarrying, and Construction improved while Manufacturing,
Agriculture, Forest & Fishing, Transportation, Storage & Communication, and Miscellaneous
declined during the review period (see Chart 8).











10
Chart 8: Sectoral Credit Allocation
0.0 5.0 10.0 15.0 20.0 25.0 30.0
Agric, Forest. & Fishing
Mining & Quarrying
Manufacturing
Construction
Elect., Water & Gas
Commerce and Finance
Transp., Stor. & Commu.
Services
Miscellaneous
4.3
2.3
9.5
8.4
7.2
27.6
4.7
27.8
8.1
3.66
2.99
9.24
9.82
12.34
25.15
4.49
24.90
7.41
Feb-14 Feb-13


Off-Balance Sheet Activities

Off-balance sheet items (contingent liabilities) grew, in year-on-year terms, by 40.9 percent to
GH5.41 billion as at February 2014 compared with a growth of 20.1 percent in the corresponding
period in 2013. Contingent liabilities as a percent of total liabilities, increased marginally to 16.3
percent in February 2014 from 16.2 percent in February 2013 (see Table 4). The increase in the
growth of offbalance sheet exposures showed acceleration in trade finance over the period.

Table 4: Contingent Liabilities
Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14
Contingent Liabilities (GH) 840.8 1,349.9 1,523.6 1,509.2 2,470.9 3,194.5 3,835.9 5,405.3
Growth (y-o-y) (8.1) 60.5 12.9 (0.9) 63.7 29.3 20.1 40.9
% of Total Liabilities 17.8 18.9 15.9 12.2 16.1 16.4 16.2 16.3


5.4.2 Asset Quality
The nonperforming loan ratio (NPLs) of the banking industry was 12.7 percent in February 2014 as
against 13.5 percent in February 2013. Similarly, loan loss provision to gross loans also declined to
5.6 percent in February 2014 as against 6.1 percent in February 2013. The ratio of NPL net of
provisions to capital of 10.1 percent in February 2014 was also an improvement over the February
2013 position of 11.7 percent. All the main indicators of loan asset quality therefore showed
improvement in the quality of the banks lending books.



11
Table 5: Asset Quality
Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14
SUB-STD (GHm) 37.2 115.3 136.3 524.5 267.1 258.4 426.8 439.4
DOUBTFUL (GHm) 50.3 106.4 125.9 385.5 220.4 266.9 318.2 385.7
LOSS (GHm) 106.5 136.3 243.0 501.8 742.6 833.6 1,084.9 1,522.7
NPL (GHm) 194.0 358.1 505.2 1,411.7 1,230.1 1,358.9 1,829.9 2,347.8
NPL Ratio (%) 7.3 8.4 8.1 20.0 16.6 13.7 13.5 12.7
NPL Net of Provision to Capital (%) 0.93 11.87 4.67 27.24 12.17 10.63 11.73 10.08
Loan provision to Gross loan (%) 5.67 4.88 5.76 10.72 9.04 7.13 6.14 5.64
Adjusted NPL Ratio 3.5 5.4 4.4 13.9 7.3 5.8 6.0 4.9


Credit to the private sector contributed 89.4 percent of the total banking sectors non-performing
loans at end February 2014 compared with 87 percent in February 2013. The public sector however
directly contributed 10.6 percent to the total nonperforming loans in February 2014 compared with
13 percent in February in 2013.

Table 6: Distribution of gross loans and NPLs by Borrower TYPE
Share in Total Share in Share in Total Share in Share in Total Share in
Credit NPLs Credit NPLs Credit NPLs
a. Public Sector 8.8 8.8 11.8 13.0 11.2 10.6
i. Government 2.3 0.1 5.0 0.2 3.3 2.1
ii. Public Institutions 1.6 0.7 1.8 0.5 1.3 1.3
iii. Public Enterprises 4.9 8.0 5.0 12.3 6.6 7.3
b. Private Sector 91.2 91.2 88.2 87.0 88.8 89.4
i. Private Enterprises 74.1 84.0 68.9 78.5 69.8 80.5
o/w Foreign 9.9 5.2 9.0 5.8 13.6 6.8
Indigeneous 64.2 78.9 59.9 72.7 56.2 73.7
ii. Households 15.5 6.4 17.3 7.3 16.8 7.8
iii. Others 1.6 0.8 2.0 1.1 2.2 1.1
Feb-12 Feb-13 Feb-14


Commerce and finance sector accounted for the largest amount of the banking sector NPLs followed
by services, manufacturing and construction. Electricity, Gas and Water sector accounted for the
lowest amount of the industrys NPLs (See Chart 9).





12
Chart 9: Sectoral Distribution of Total Credit and Non- Performing Loans as at February
2014
0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0
Agric, Forest. & Fishing
Mining & Quarrying
Manufacturing
Construction
Elect., Water & Gas
Commerce and Finance
Transp., Stor. & Commu.
Services
Miscellaneous
3.7
3.0
9.2
9.8
12.3
25.1
4.5
24.9
7.4
5.3
4.6
11.5
8.2
2.8
40.9
3.6
16.2
6.8
Share of Total NPL Share of Total Credit





Chart 10: Proportion of Loans Impaired in Each Sector (Sectoral NPLs)

0.0 5.0 10.0 15.0 20.0 25.0
Agric, Forest. & Fishing
Mining & Quarrying
Manufacturing
Construction
Elect., Water & Gas
Commerce and Finance
Transp., Stor. & Commu.
Services
Miscellaneous
15.0
18.6
17.4
17.5
11.5
17.6
16.2
7.5
9.9
18.5
19.5
15.9
10.6
2.9
20.7
10.1
8.3
11.7
Feb-14 Feb-13



5.5 Liquidity Indicators

The banking sector remained generally liquid. All indicators of liquidity except liquid assets to total
assets ratio (core) improved in February 2014 relative to the levels attained in February 2013 (see
Table 7).

Table 7: Liquidity Ratios
13
Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14
Liquid Assets (Core) - (GH'million) 1,121.7 1,748.7 2,404.3 3,348.6 4,635.2 6,043.5 6,397.8 8,522.0
Liquid Assets (Broad) -(GH'million) 2,468.4 3,112.9 4,060.1 6,824.1 9,452.0 12,068.7 13,921.0 19,672.9
Liquid Assets to total deposits (Core) 31.7 34.5 34.8 36.2 38.2 37.4 32.9 34.0
Liquid Assets to total deposits (Broad) 69.8 61.5 58.7 73.8 77.9 74.8 71.6 78.5
Liquid assets to total assets (Core) 20.9 21.8 21.8 23.5 25.9 26.7 22.9 21.8
Liquid assets to total assets (Broad) 46.0 38.8 36.8 47.8 52.9 53.3 49.7 50.3


5.6 Capital Adequacy Ratio
The industrys capital adequacy ratio (CAR) as measured by the ratio of risk-weighted capital to
riskweighted assets was 17.5 percent in February 2014 compared with 18.2 percent recorded in
February 2013 (see Chart 11). The CAR was above the 10 percent prudential and statutory
requirements.
Chart 11: Capital Adequacy Ratio Industry (%)
Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14
RWA/Total Assets (RHS) 74.8 76.0 68.6 68.3 67.9 69.7 71.5
CAR 14.9 14.8 19.7 18.5 17.4 18.2 17.5
TIER 1 CAR 13.5 14.0 18.5 18.6 14.9 16.6 15.6
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
-
5.0
10.0
15.0
20.0
25.0
P
e
r
c
e
n
t



5.7 Profitability

5.7.1 Highlights from the Banks Income Statement
Indicators of profitability for the banking industry showed some slowdown in banks earnings
performance for the period ended February 2014. The industry net interest income registered a
growth of 40.4 percent in February 2014 compared with 60.2 percent growth in February 2013.

The banking sectors income before tax grew, in year-on-year terms, by 32 percent in February 2014
compared with 76 percent growth in February 2013. Similarly, the industrys net profit after tax also
grew by 28.3 percent in February 2014 compared with 70.9 percent growth in February 2013.



14
Table 8: DMBs Income Statement
Feb-12 Feb-13 Feb-14 Feb-13 Feb-14
Interest Income 377.7 629.1 881.8 66.6 40.2
Interest Expenses (111.0) (201.9) (282.1) 82.0 39.7
Net Interest Income 266.7 427.2 599.8 60.2 40.4
Fees and Commissions (Net) 111.6 139.1 158.1 24.7 13.7
Other Income 87.2 81.4 132.5 (6.7) 62.9
Operating Income 465.5 647.6 890.3 39.1 37.5
Operating Expenses (242.0) (300.5) (408.2) 24.2 35.9
Staff Cost (113.4) (141.9) (195.5) 25.1 37.8
Other operating Expenses (128.6) (158.6) (212.7) 23.3 34.1
Net Operating Income 223.5 347.2 482.2 55.3 38.9
Total Provision (Loan losses, Depreciation & others) (61.7) (60.8) (95.2) (1.5) 56.5
Monetary Loss 1.1 0.5 (8.5) - -
Income Before Tax 162.9 286.8 378.5 76.0 32.0
Tax (36.7) (71.1) (101.6) 93.6 43.0
Net Income 126.2 215.8 276.9 70.9 28.3
Gross Income 576.5 849.5 1,172.4 47.4 38.0
(GH 'million) Y-on-y Growth (%)


5.7.2 Interest Margin and Spread
The ratio of gross income to total assets (i.e. assets utilisation) remained unchanged at 3 percent as at
February 2014. Banks interest spread increased to 2.5 percent in February 2014 from 1.8 percent in
February 2013 (see Table 9).

Table 9: Profitability Indicators (%)
Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14
Gross Yield 2.3 2.6 3.3 3.4 2.6 2.4 2.9 3.7
Int Payable 1.0 0.9 2.0 2.3 1.0 0.8 1.1 1.2
Spread 1.3 1.7 1.2 1.2 1.5 1.6 1.8 2.5
Asset Utilitisation 2.6 2.7 3.4 3.8 2.6 2.5 3.0 3.0
Interest Margin to Total Assets 1.3 1.2 1.2 1.3 1.2 1.2 1.5 1.5
Interest Margin to Gross income 50.4 46.2 35.1 34.1 47.8 46.3 50.3 51.2
Profitability Ratio 19.4 29.6 14.3 13.2 13.8 21.9 25.4 23.6
Return On Assets (%) before tax 3.7 3.8 3.7 4.0 3.1 4.3 6.2 6.0
Return On Equity (%) after tax 23.1 26.3 22.5 32.2 15.5 24.0 31.2 29.4

5.7.3 Return on Assets and Return on Equity
The banking industrys return on assets (ROA) decreased marginally to 6 percent as at February
2014 from 6.2 percent in February 2013. Similarly, return on equity (ROE) decreased to 29.4 percent
in February 2014 from 31.2 percent in February 2013 (see Table 9).

5.7.4 Composition of Banks Income
Interest income from loans continued to be the main source of income for the banking industry and
constituted 43.6 percent of total income in February 2014 compared with 48.1 percent in February
2013. Investment income share of total income was 31.6 percent in February 2014 compared with
the 25.9 percent recorded in February 2013. The share of income from fees and commission
declined to 13.5 percent in February 2014 from 16.4 percent in February 2013 (see Chart 12).
15
Chart 12: Composition of Income (%)

F e b -0 8 F e b - 0 9 F e b -1 0 F e b - 1 1 F e b - 1 2 F e b -1 3 F e b - 1 4
O t h e r I n c o m e 8 . 8 1 3 . 2 2 2 . 4 1 0 . 2 1 5 . 1 9 . 6 1 1 . 3
C o m m i s si o n s & F e e s 2 0 . 3 1 4 . 5 1 2 . 0 1 7 . 1 1 9 . 4 1 6 . 4 1 3 . 5
L o a n s 5 3 . 8 5 3 . 1 4 8 . 9 4 8 . 3 4 5 . 6 4 8 . 1 4 3 . 6
I n v e s t m e n t s 1 7 . 1 1 9 . 0 1 6 . 8 2 4 . 3 2 0 . 0 2 5 . 9 3 1 . 6
-
1 0 . 0
2 0 . 0
3 0 . 0
4 0 . 0
5 0 . 0
6 0 . 0
7 0 . 0
8 0 . 0
9 0 . 0
1 0 0 . 0
P
e
r
c
e
n
t


5.8 Operational Efficiency
Indicators of operational efficiency as at February 2014 showed a mixed performance. Cost to
income ratio increased to 75.7 percent in February 2014 from 74.7 percent in February 2013 but cost
to total assets ratio remained unchanged at 2.3 percent within the review period. Operational cost to
gross income also declined to 51.6 percent in February 2014 from 50.9 percent in February 2013
while operational cost to assets remained unchanged at 1.5 percent within the period under review
(see Chart 13).

Chart 13: Efficiency Indicators
Fe b -0 8 Fe b -0 9 Fe b -1 0 Fe b -1 1 Fe b -1 2 Fe b- 1 3 F e b- 1 4
Co st to inc o me 7 0 .5 8 5 .8 7 1 .8 8 6 .4 7 8 .3 7 4 .7 7 5 .7
O p e r ation al Co st to gr oss inc ome 4 9 .6 4 8 .8 4 0 .3 6 1 .6 5 9 .0 5 0 .9 5 1 .6
Co st to to tal asse ts (RHS ) 1 .9 2 .9 2 .7 2 .2 2 .0 2 .3 2 .3
O p e r ation al Co st to to tal asse ts (RHS) 1 .3 1 .6 1 .5 1 .6 1 .5 1 .5 1 .5
-
0 . 5
1 . 0
1 . 5
2 . 0
2 . 5
3 . 0
3 . 5
-
1 0 . 0
2 0 . 0
3 0 . 0
4 0 . 0
5 0 . 0
6 0 . 0
7 0 . 0
8 0 . 0
9 0 . 0
1 0 0 . 0
P
e
r
c
e
n
t


16
5.9 Banks Counterparty Relationships

5.9.1 Developments in Banks Offshore balances & External Borrowing
DMBs offshore balances grew by 61.09 percent in February 2014 compared with a decline of 19.31
percent in February 2013. Offshore placement similarly went up by 41.73 percent in February 2014
from the contraction in growth by 39.84 percent recorded in February 2013 (see Table 10).

Table 10: Developments in Banks Offshore Balances (%)












Banks foreign short-term borrowing continued to increase with a growth of 126.02 percent recorded
in February 2014 from a growth of 69.50 percent in February 2013. Long-term offshore borrowing
growth also increased from a contraction of 12.92 percent in February 2013 to 35.10 percent in
February 2014 (see Table 11).

Table 11: Year-on-year growth in Foreign Borrowing

Feb-10 Feb-11 Feb-12 Feb-13 Feb-14
Growth in short term
borrowing 29.11 2.60 - 4.94 - 69.50 126.02
Growth in long term
borrowing 12.73 - 0.74 46.50 12.92 - 35.10
Growth in Total Foreign
Borrowing
14.38 1.70 - 9.22 39.07 105.00




Jan-12 Feb-12 Jan-13 Feb-13 Jan-14 Feb-14
Offshore balances as %
to Networth
67.43 70.29 43.04 41.67 45.87 48.88
Monthly Growth in
Offshore balances (%)
16.03 4.19 (6.53) (1.12) 1.84 11.29
Annual Growth in
Offshore balances (%)
68.17 47.89 (14.97) (19.31) 43.13 61.09
Annual Growth in
Nostro Balances (%)
49.33 26.52 6.12 1.50 40.52 74.91
Annual Growth in
Placement (%)
88.54 73.46 (35.68) (39.84) 49.38 41.73
17
Chart 14: Classification of Banks Borrowing by Source





6.1 Conclusion and Outlook

The banking sector remains sound and solvent as evidenced by the financial soundness indicators of
earnings, portfolio quality, liquidity, and capital adequacy. However, the continued decline in the
performance of major macroeconomic indicators, namely inflation and the Cedis depreciation
against the major trading currencies (US Dollar, British Pound and the Euro) has resulted in
marginal declines in banks profitability.




















18
APPENDIX

Appendix A1: Selected Indicators of the Banking Industry
Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14
Market Share (Top 5 banks) 62.8 48.3 55.6 52.0 48.8 46.1 44.6 47.5 45.0
Gini Concentration Index 51.6 48.3 48.4 46.9 44.3 40.5 40.4 42.4 44.2
Herfindahl Index 981.2 848.4 838.0 746.6 675.5 622.1 59.9 638.6 601.8
Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14
Asset to GDP 20.5 23.2 26.6 30.1 31.0 29.9 30.9 38.3 53.5
Private Sector Credi/GDP 7.6 9.5 11.6 13.8 12.8 10.5 12.4 16.1 23.1
Total Credit to GDP 10.0 11.4 14.0 17.0 15.3 12.4 13.6 18.5 25.2
Deposits to GDP 13.6 15.3 16.8 18.9 20.1 20.3 22.1 26.6 34.3
Indicators of Concentration and Competition
Indicators of Financial Depth and Intermediation



Appendix A2: Balance Sheet (Flow data)
Balance Sheet (flow data) Feb-13 Feb-14
Assets
Credit 3,592.1 4,896.0
of which foreign currency 638.7 2,515.3
Investments 1,530.0 3,816.0
Foreign Assets (354.3) 1,139.9
Total Assets 5,371.1 11,132.4
Share of Assets (flow)
Credit 66.9 44.0
of which foreign currency 11.9 22.6
Investments to total Assets 28.5 34.3
Foreign Assets (6.6) 10.2
Liabilities
Deposits 3,290.1 5,628.6
of which foreign currency 699.7 1,691.1
Borrowings 735.8 2,749.8
Shareholders' Funds 1,134.2 1,595.7
Shareholders' Funds & Liabilities 5,371.1 11,132.4
Share of Liabilities (flow)
Deposits 61.3 50.6
of which foreign currency 13.0 15.2
Borrowings 13.7 24.7
Shareholders' Funds 21.1 14.3