Banks’ operating in Ghana recorded strong profitability in the first eight months of 2023.

According to the Bank of Ghana, the banking industry recorded a profit of ¢5.7 billion, representing a 41.4% annual growth, compared with 26.5% growth recorded last year.

Specifically, net interest income increased sharply by 37.9% to ¢13.5 billion, while net fees and commissions went up by 27.3% to ¢2.9 billion.

Importantly, the key financial soundness indicators remained broadly stable.

Profitability indicators improved, with Return-on-Equity (ROE) at 36.9% in August 2023 from 23.0% in August 2022, while Return-on-Assets (ROA) increased to 5.4% from 4.7% in the same comparative period.

Also, liquidity indicators for the industry improved during the period under review.

Capital Adequacy Ratio (CAR) adjusted for the regulatory reliefs was 14.2% in August 2023, higher than the revised prudential minimum of 10.0%.

The industry’s Non Performing Loans ratio however increased to 20.0 percent in August 2023, from 14.3% in August 2022. This is attributed to elevated credit risk associated with the lagged effect of the macroeconomic crisis in 2022.

Private sector increased moderately by 10.7%

Meanwhile Private sector credit increased moderately year-on-year by 10.7% in August 2023, data from the Bank of Ghana has revealed.

In real terms, credit to the private sector contracted by 21.0% relative to a growth of 1.4% over the same comparative period, reflecting increased risk aversion of banks during the period.

Banking sector remains stable

The banking sector remained stable as the industry’s total assets increased to ¢244.7 billion in August 2023, from ¢204.6 billion in August 2022.

The growth in banks’ assets was funded by deposits, which grew sharply by 38.9% to ¢189.9 billion from ¢136.7 billion in the same comparative period.

Total borrowings by banks, however, contracted by 41.0% to ¢13.9 billion in August 2023 from ¢23.5 billion a year earlier.