Be prudent in risk assessment – Economist to local banks

Banking consultant, Dr Richmond Atuahene, has urged local banks in the country to be prudent in their risk assessment to improve on their non-performing loans.

His call follows the comparably better performance of foreign-owned banks to local banks between the years 2019 and 2020.

Data from the financial statements of some leading banks in the country for the year ended 2020, shows an increase in profits for some and some declines for others, foreign banks, however, outperform the local ones.

This can be gleaned from the Summary Statements of Comprehensive Incomes of 10 of Ghana’s top banks during a year in which COVID-19 ravaged all aspects of the economy.

For instance, ADB, out of the 10 banks reviewed by Citi Business News, saw an increase of about 340 percent in its profits, the highest jump from 2019 to 2020.

The bank ended 2019 and 2020 with profits of about GHS14.8 million and GHS65 million respectively.

The Consolidated Bank Ghana, saw its profit drop the steepest out of the 10 banks reviewed, which is by about 33 percent, reducing from about GHS70 million in 2019 to GHS46 million in 2020.

A bank like Ecobank Ghana with one of the largest asset bases in the banking sector saw profits further improve by about 23 percent, from over GHS440 million in 2019 to over GHS540 million in 2020.

GCB’s profit only increased marginally by about 4 percent from about GHS420 million in 2019 to about GHS 440 million in 2020.

Other banks like Standard Chartered, Zenith, and Access however saw profits sour by over 30 percent from 2019 to 2020.

Standard Chartered Bank for example saw its profits jump by about 70 percent from GHS281.9 million in 2019 to about GHS478 million in 2020.

Access Bank and Zenith Bank saw similar percentage increases in their profits, about 38 percent, with profits of Access Bank rising to over GHS240 million in 2020 from over GHS170 million in 2019, while Zenith Bank ended 2020 with about GHS340 million from about GHS245 million in 2019

Even though its profit numbers were still high in 2020, over GHS250 million, Fidelity Bank still saw its profitability wane slightly by about negative 3 percent from about GHS260 million in 2019.

In an interaction with Citi Business News, Dr Atuahene explained that foreign banks were prudent in their risk assessment as they do not have many government contracts, he further attributed their strong corporate governance structures from over the years to their good performance.

“The reason why they [local banks] have lower profitability is that some of them are financing government contracts while the foreign banks are not interested in government loans.”

Source:Citibusinessnews