Banks in the country have reported their finan­cial and operational performance for the year ended December 2008, show­ing remarkable improvement on the results for 2007. According to the Bank of Ghana (BoG), the banking sector's profit mar­gin before tax had increased by 22.9 per cent to GH¢30 1.3 million as of Decem­ber 2008 compared with 13.8 per cent for the 12 months to December 2007. Net profits at GH¢227.3 million recorded an annual growth of 28.5 per cent in December 2008 compared with 18.5 per cent growth during the same period in 2007. "The significant increase in net interest income and other income accounted for the relatively faster growth in net profits over the year", the BoG said. Income from fees and commissions registered a relatively slower growth of 29.1 per cent in December 2008 com­pared with 44.8 per cent for the same period in 2007. Other income surged by 159.7 per cent, compared with 36 per cent growth over the same period. The profitability ratio of the banking industry, defined as the ratio of net income to gross income, however, dipped marginally to 13.3 per cent from 16.23 per cent for the same period in 2007. The decline in the ratio, relative to same period in 2007, was due to the faster growth in operating expenses. BoG estimates that the ratio of gross income to total assets (i.e. assets utilisa­tion) moved up to 18.2 per cent in December 2008, due to increases in net interest income over the period . "This was an improvement over December 2007 position of 14 per cent. The banking industry recorded a spread of 8.6 per cent in Decembet 2008 com­pared with 8.4 per cent spread recorded for the same period in 2007. The cost of funds, in part, accounts for the widening spread," the BoG has stated. The share of investment income (bills, securities arid shares) in total income continues to trend downward. As of December 2008, the share had declined further to 14.3 per cent com­pared to a share of 21.5 per cent during the same period in 2007. The share of income from fees and commissions also dipped to 17.8 per cent from 21.5 per cent over the same period. The share of income from loans and advances, however, continues to rise. It increased to 55.3 per cent as of December 2008 from the 49.4 per cent share recorded for September 2007. Earning indicators continue to reflect satisfactory annualised return on assets (ROA) and return on equity (ROE) of 3.2 per cent and 23.7 per cent respectively in December 2008, the BoG has stressed. "This may be compared with the December 2007 positions of 3.7 per cent and 25.8 per cent and the September 2008 positions of 3.5 per cent and 2.6 per cent respectively", it added. Generally, efficiency indicators, of the banking sector remained strong over the year. The operational cost to income declined over the period, while opera­tional cost to total asset ratio, however, inched up to 58.6 per cent and 9.3 per cent respectively in December 2008, from 59.1 per cent and 8.3 per cent respectively in 2007. The ratios of administrative expens­es to income and personnel expenses to non-interest expenses also inched up from 13.6 per cent and 31.2 per cent to 15.3 percent and 32.8 per cent respectively over the same period. GB