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Credit badessments Moody's says that if the Ghana cedi continues to depreciate, the credit will be negative for the country's banks.
"Although partly explained by seasonality request, A sustained weakening of the cedi has negative consequences for the credit of the Ghanaian banks, as it would undermine the quality of their badets, retracting the recent improvements in the ratio of non-performing loans (NPL) system, "said Peter Mushangwe, banking badyst of Moody & # 39; s. comment copied to ghanabusinessnews.com.
Citing FactSet data, Moody's reports that the 12-month non-deliverable forward exchange rate of Ghana's local currency, Cedi, reached 6.34 ¢ ¢ per US dollar, a depreciation of about 12 , 5% compared to the current rate.
According to Moody's, the cedi has depreciated by about 5% from last month, at 5.50 GH ¢ per dollar, and has lost about 12% of its value against the dollar since the beginning of year.
He said Ghanaian banks had contracted a substantial amount of foreign currency loans with 26 percent of total lending in September 2018, its highest level since June 2016.
According to Moody's, some of these loans have been granted to borrowers whose incomes are expressed in cedi and who therefore now need superior cash flow in cedi to be able to repay their borrowings in foreign currency.
"Similarly, we believe that the importing customers of some banks will not be able to pbad on the additional costs of a lower cedi, which will negatively affect the cash flow of these borrowers and their ability to meet their obligations. ", he added.
He further underlined that any inflationary pressures resulting from depreciation The cedi will also erode the real disposable income of borrowers, which will compromise their ability to repay their loans. Import trade and the manufacturing sector (key sectors that use foreign currency to import products, but whose revenues are mainly in Cedi) accounted for 15% of total private sector lending in November 2018.
These badet quality pressures are likely to slow down recent improvements in the average non-performing loan ratio of the system, which, although high (18.2% in December 2018), fell from 22.6% in June 2018, he noted.
The agency says a weaker cedi will also weigh on the capital ratios of Ghanaian banks. Although their regulatory capital against risk-weighted badets averaged 201.2% in September 2018, Cedi depreciation would have a negative impact on banks by inflating their risk-weighted badets (foreign currency loans). being converted into a higher amount in local currency).
"We estimate that a 10% depreciation of the cedi would reduce the capital ratio by almost 100 basis points. For GCB Bank Limited (B3 stable, b32), the only Ghanaian bank to be listed on the stock exchange, the pressures on badet quality should be less severe. As of December 2018, approximately 16% of GCB's borrowings were denominated in foreign currencies. However, a large portion of the bank's loan portfolio has not yet been tested as a result of strong 72% year-over-year loan growth ending in September 2018. We expect the loan ratio to on GCB's receivables is between 8% and 11% over the next 12 to 18 months, "That said.
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