Speaking at the 122nd Monetary Policy Committee (MPC) press conference on January 27, Dr. Addison highlighted that the industry’s Capital Adequacy Ratio (CAR) rose to 11.3% in December 2024, up from 8.3% a year earlier.

Although the banking sector’s profits increased in 2024 compared to the previous year, the pace of growth slowed down, resulting in a moderation of profitability indicators. This trend points to the sector’s ongoing stability but also indicates some caution in its performance, with the Governor attributing the slowdown to elevated credit risks.

Dr. Addison expressed concerns over the rising Non-Performing Loans (NPL) ratio, which increased to 21.8% in December 2024 from 20.6% in December 2023. This highlights the ongoing issue of credit quality in the banking sector, with increased defaults putting pressure on financial institutions.

On a positive note, the banking sector’s assets grew by 33.8% in 2024, reflecting an expansion despite these challenges. Furthermore, the Capital Adequacy Ratio (CAR) with reliefs saw a slight improvement, rising marginally to 14.0% in December 2024, from 13.9% the year before. This indicates that, despite challenges, the banking sector remains in a strong position to absorb shocks and continue operations effectively.

Dr. Addison credited the improved performance of the banking sector to favorable domestic macroeconomic conditions, which have helped provide some resilience. However, he also cautioned that the main risk to the banking sector in the future remains elevated credit risk, which continues to threaten the stability of the financial system.

Overall, while the banking sector remains on solid ground, these indicators suggest that it will need to navigate credit challenges and other risks moving forward to maintain its stability and profitability.