Highlights from the Bank of Ghana’s (BoG) Income Statement as of August 2023, indicate that banks in the country wrote off a total of ¢2.416 billion as bad debt during the first eight months of the year.
This figure represents a notable increase of 36.4% compared to the previous year. To provide context, this amount surpasses the GH¢1.713 billion in bad loans recorded at the end of June 2023.
The bad debt provisioning primarily included losses related to loans and depreciation, among other factors.
The Bank of Ghana’s report also noted a decline in the asset quality of the banking industry during the review period. This deterioration is evident through the increase in both the Non-Performing Loan (NPL) stock and the Non-Performing Loan (NPL) ratio.
Specifically, the industry’s NPL ratio rose from 14.3% in August 2022 to 20.0% in August 2023. Similarly, when adjusted for fully provisioned loan loss categories, the NPL ratio surged from 3.8% to 9.0% during the same period. This was attributed to the growing presence of sub-standard and doubtful loans within the NPL stock.
The rise in the NPL ratio was attributed to the NPL stock’s faster growth relative to the total loan growth during the reference period. The banking industry’s NPL stock increased by 53.6%, reaching ¢14.5 billion in August 2023, up from ¢9.5 billion in August 2022.
This increase can be partially attributed to the revaluation of foreign currency NPLs and the deterioration of some domestic currency loans.
When categorizing the NPLs by economic sector, the private sector accounted for the majority of non-performing loans. In August 2023, approximately 95.0% of NPLs were linked to the private sector, a slight decrease from the 95.9% recorded in August 2022. Meanwhile, the public sector’s share of NPLs increased to 5.0% from 4.1% compared to the previous year.