Banks in Ghana recorded a staggering 224.6% growth in profit to GH¢8.3 billion in 2023, an indication of a rebound from the Domestic Debt Exchange Programme-related losses posted in 2022.

In 2022, the banking industry lost GH¢6.6 billion.

According to the January 2024 Monetary Policy Report of the Bank of Ghana, the growth outturns for key income lines of banks contributed to the improved profit performance in 2023.

Net interest income grew by 41.5% in 2023, compared to a growth of 18.7% in 2022. Fees and commissions also grew by 22.7% in 2023, relative to a growth of 25.2% in 2022.

The increased growth in net interest income in December 2023, the Central Bank said, was on account of higher interest income on loans and investments from increased lending rates and interest rates on money market instruments.

The moderation in interest expenses, which is attributed to the contraction in borrowings observed during the year, also contributed to the higher growth in net interest income in December 2023 relative to December 2022.

Return on Assets and Return on Equity

According to the Bank of Ghana, the profitability indicators for the banking sector turned positive in December 2023 on the back of the improved profit performance recorded during the year.

The sector’s Return on Assets (ROA) improved to 5.4% in December 2023 from -3.8% in December 2022. Also, banks’ Return on Equity (ROE) rose to 34.2% from -25.5% over the same comparative period.

Banks record lower impairments on financial assets

Banks also reported lower impairments on financial assets in 2023, contributing to the improved profit performance during the year.

Total provisions and impairments contracted by 79.2% in December 2023, after increasing sharply in December 2022 on account of the huge impairments on restructured bonds.

Operating expenses, on the other hand, recorded a higher growth of 34.9% in December 2023, relative to the 27.2% growth in December 2022, driven by the higher growth in other operating expenses and staff costs.

Banking sector to remain stable

Overall, the Bank of Ghana said the banking sector’s performance in 2023 pointed to a gradual recovery from the challenges in 2022.

Growth in assets increased, supported by increased liquidity flows from deposits and a build-up in shareholders’ funds from the profits posted by banks in 2023.

The sector it said is projected to remain stable with the implementation of recapitalisation plans during the year.