Profitability performance of the banking sector remained robust in August 2021 as the 23 banks operating in Ghana registered growth rate of 27.4%, higher than the 19.2% recorded a year ago.

According to the September 2021 Banking Sector Development Report, the banks registered ¢3.17 billion profit in August 2021, compared with ¢2.72 billion during the same period last year. This signaled recovery in the Ghanaian economy.

The report said the higher growth outturns for key income lines of banks relative to the same period last year, contributed to the strong profit performance during the review period.

Importantly, income from investments remained the largest component of banks’ income streams in August 2021, accounting for more than half of banks’ income (51% in August 2021, an increase from 44.8% in August 2020).

The share of interest income from loans, however, declined from 34.8% to 29.6%, in line with the lower credit growth this year compared to last year. The share of banks’ income from fees and commissions increased to 12.2% from 11.5%, due to the higher growth of net fees and commissions over the period. The share of other income, however, declined to 7.2% from 8.8% during the period under review.

The Return on Assets and Return on Equity Profitability indicators reflected the strong profit before tax outturn in August 2021.

The sector’s Return on Assets (ROA) improved to 4.6%, from 4.2% during the comparative period. However, banks’ Return on Equity (ROE) declined marginally to 21.0% in August 2021, from 21.4% in August 2020, reflecting the slight moderation in profit after tax during the reference period.

Operational Efficiency

The banking sector was relatively more cost efficient in August 2021, compared with August 2020 as evidenced by improvements in key efficiency indicators during the period.

Marginal improvements were recorded in the cost-to-income ratio from 79.3% in August 2020 to 79.1% in August 2021, the cost-to-total assets ratio from 7.3% to 7.2% and the operational cost to gross income ratio from 53.5% to 53.4%.

The operational cost to total asset ratio, however, remained unchanged at 4.9% over the review period.