Structure of banks’ investment portfolio unchanged in 2020 – Report

The structure of the banks’ investment portfolio remains the same in 2020 despite the increase in its investment holdings.

According to Tesah Capital, the movement towards longer maturity instruments which led to an increase in the share of securities in total investments from 1.1% in 2018 to 1.8% in 2019 was reversed in 2020 to 0.4%.

In 2020, banks’ holdings in bonds were 77.6% against 68.2% in 2019, while investment in treasury bills was 20% last year against 30% in 2019.

However, banks’ appetite for Ghanaian government securities remains strong as they reduce the size of their loan portfolios in response to the risks presented by the Covid-19 pandemic on banking activities.

For credit growth, it slowed in 2020 from 25.7% in 2019 to 4.6%.

This was occasioned by the outbreak of the Covid-19 pandemic and its effects on businesses and loan repayments.

However, credit to the private sector still constitutes the largest proportion of credit in the banking sector. Its share increased to 91.1% in 2020 from 87.1% in 2019, while the public sector’s share decreased to 8.9% from 12.6% during the same period.

Structure of assets and liabilities

Total banking sector assets stood at 149.3 billion yen in December 2020, indicating an annual growth of 15.7% (2019: 20.2%).

The lower growth in 2020 is due to the negative impact of the Covid-19 pandemic on banking activities in 2020.

Net advances made up the largest proportion of the asset mix until 2018, when investment began to dominate.

The strong growth in total investments in 2018 is largely due to special resolution bonds issued to Consolidated Bank Ghana (CBG).

Investment holdings increased in 2020 as banks shifted to less risky assets, namely Ghanaian government securities, due to the high credit risks induced by the pandemic.

Meanwhile, deposits remained the industry’s main source of funding, increasing their share from 64.7% to 69.6% between 2019 and 2020.

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