By [email protected]
SIERRA LEONE, Freetown – The sectoral distribution of Loans and Advances in the Banking Industry has shown that as of 31st December 2019, Commerce & Finance had the greatest share of the credit portfolio with Le504.47billion (24.26%).
This was followed by Construction at Le451.51billion (21.71%) and Personal Services – Le217.15 billion (10.44%), according to data from the Bank of Sierra Leone.
With the increase in deposits, Gross Loans and Advances increased by Le266.15 billion (14.68%) from Le1.81trillion in December 2018 to Le2.08trillion in December 2019 indicating an increase in intermediation.
The non- performing loans ratio deteriorated to 16.62% as at December 2019, compared to 12.73% in December 2018. The deterioration, the Central Bank says was mainly due to fiscal consolidation, which limited payments to contractors, some of whom had taken loans from the banks.
In their analysis of the industry’s liquidity, it stated that the cash reserve ratio for end December 2019 stood at 17.72%, compared to 17.59% registered for end December 2018. Both ratios were above the statutory minimum limit of 12%, with surpluses of 5.72% and 5.59%, respectively.
The industry also met the overall liquidity requirements, recording 107.97% and 67.91%, in excess of the prudential average ratios of 29.74% and 33.08% in December 2019 and December 2018, respectively. This the Central Bank says was due to the high investment by banks in treasury bills as the government’s appetite for domestic borrowing increased.
The pre-tax profit for the sector increased by Le69.15billion (14.27%) from Le484.39 billion at end of December 2018 to Le553.53 billion in December 2019. Although interest income continues to be the significant factor accounting for the growth in revenue, it declined by Le46.61billion (4.14%) from Le1.12trillion to Le1.08trillion.
This was due to decreases in interest income from loans and advances due to suspension of interest payment as the loan portfolios deteriorated, evidenced in the deterioration in the NPL position of 12.73% in December 2018 to 16.62% in December 2019.
However, other operating income increased by Le 60.86billion (15.26%) from Le 398.78 billion as of December 2018 to Le459.64billion in December 2019.
For the period ended 31st December 2019, interest income accounted for more than half of the industry’s total income (70.11%), and includes interest on Treasury bills and bearer bonds (45.83%), interest on loans & advances (22.87%) and interest on other investment (1.41%), while other operating income contributed 29.89% as shown on the pie chart below.
On the expenditure side, other operating expenses accounted for a significant proportion of the industry’s expenses as it accounted for 81.30%. These included administrative & other costs (40.64%), Staff costs (31.06%) and others (9.59%) of total expenses.
Interest expenses were 15.30%, while other expenses accounted for 3.40% for the period ended 31st December 2019 as indicated in the diagram below