Banking industry’s shareholders’ funds hit ¢23.5bn in August 2021

The September 2021 Banking Sector Development Report has indicated that the banking industry’s shareholders’ funds position remained strong, growing by 15.8% to ¢23.5 billion as of the end of August 2021.

The slower growth in shareholders’ funds this year relative to last year reflects in part, the marginal slowdown in profit growth this year as well as the lifting of restrictions on dividend payments by banks put in place at the height of the Covid-19 pandemic.

The report emphasized that the strong shareholders’ funds position continues to support the stability and resilience of the banking sector.

Overall, the banking industry posted a strong balance sheet position in August 2021 on the back of increased liquidity flows from deposits, shareholders’ funds, and borrowings.

However, the lingering effect of the Covid-19 pandemic continued to constrain credit growth and contributed to the continuous reallocation of liquidity flows into investments.

The asset structure of the banking industry’s balance sheet continued to reflect banks’ preference for less risky assets during the review period.

The share of Investments increased further from 44.0% in August 2020 to 48.3% in August 2021, while the proportion of loans and advances (net) in total assets declined to 25.4% from 27.4% over the same review period.

The share of “Cash and Due from Banks” also declined marginally from 20.9% to 18.6%, as banks continued to channel liquidity flows into investments.

The share of non-earning assets (fixed assets and other assets) however, remained unchanged at 7.7% during the review period.

On the liability side, deposits continued to dominate the funding mix of banks, with its share increasing to 67.1%, from 64.2% over the two corresponding periods. The rebound in growth in borrowings translated into an increased share of 11.3% in August 2021 compared to 10.9% a year earlier.

Following a relative slower growth, shareholders’ funds moderated marginally to 14.1%, from 14.2%.  The share of “Other liabilities” also declined to 7.5% in August 2021, from 10.6% in the previous year.