The banking sector in Ghana has shown remarkable resilience and profitability in the first eight months of 2023, despite the challenges posed by the COVID-19 pandemic and the domestic debt exchange programme (DDEP). According to the latest data from the Bank of Ghana (BoG), the banks made a total profit of GH¢5.7 billion from January to August 2023, representing a 46.1% increase from the same period in 2022.
Strong Growth in Operating Income and Assets
The BoG attributed the impressive performance of the banks to their strong growth in operating income and assets, as well as their prudent management of risks and costs. The banks’ operating income increased by 32.4% to GH¢28.9 billion, driven by higher net interest income, net fees and commissions, and foreign exchange income. The banks’ net interest income grew by 25.8% to GH¢21.4 billion, reflecting the expansion of their loan portfolios and investments. The banks’ net fees and commissions rose by 29.2% to GH¢5 billion, boosted by the increased use of digital channels and services by customers. The banks’ foreign exchange income also increased by 67.8% to GH¢2.5 billion, due to the appreciation of the Ghana cedi against major currencies.
The banks’ total assets also grew by 27.9% to GH¢209.4 billion, reflecting their strong liquidity and solvency positions. The banks’ gross loans and advances increased by 23.6% to GH¢66.9 billion, supported by the recovery of economic activities and the easing of credit conditions. The banks’ investments in securities also increased by 31.8% to GH¢112.1 billion, mainly in government securities, as part of their risk management strategy. The banks’ cash and balances with the BoG also increased by 28.6% to GH¢19 billion, indicating their high liquidity levels.
Improved Asset Quality and Efficiency
The BoG also reported that the banks improved their asset quality and efficiency ratios in the first eight months of 2023, reflecting their enhanced risk management practices and operational efficiency. The banks’ non-performing loans (NPL) ratio declined to 12.4% in August 2023, from 14.8% in December 2022, due to the write-off of some bad loans and the recovery of some overdue loans. The banks’ provision coverage ratio also increased to 62.9% in August 2023, from 58.6% in December 2022, indicating their adequate provisioning for loan losses.
The banks’ cost-to-income ratio also improved to 50.7% in August 2023, from 52.1% in December 2022, indicating their improved operational efficiency and cost control measures. The banks’ return on assets (ROA) increased to 4.6% in August 2023, from 4% in December 2022, while their return on equity (ROE) increased to 26.7% in August 2023, from 22.9% in December 2022, indicating their enhanced profitability and shareholder value.
Outlook and Challenges
The BoG expressed optimism about the prospects of the banking sector in Ghana, noting that it has demonstrated resilience and robustness in the face of the COVID-19 pandemic and the DDEP. The BoG said that it will continue to monitor the performance and soundness of the banks and provide them with the necessary regulatory support and guidance to ensure their stability and growth.
However, the BoG also cautioned that the banking sector faces some challenges that could affect its performance and outlook in the medium term. These include the uncertainties surrounding the evolution of the COVID-19 pandemic and its impact on economic activities and credit demand; the high exposure of the banks to government securities and its implications for interest rate risk; the potential deterioration of asset quality due to loan repayment difficulties by some borrowers; and the cyber security risks associated with the increased use of digital channels and services by customers.
