Adnan Adams Mohammed
Bank of Ghana (BoG) Governor has asked all commercial banks operating in the country to tender their ‘capital restoration plans’ for a ‘progressive recapitalization’ over a three-year period.
The recapitalization exercise is as a result of a turnaround in banks’ profits and planned equity capital injections. The aim is to rebuild banks’ capital buffers, enhance resilience, and position the sector to support the country’s growth agenda.
In 2022, the industry collectively posted losses of GH¢8.0 billion, compared to a profit of GH¢7.4 billion in 2021. Key profitability indicators such as return-on-assets and return-on-equity turned negative due to these losses.
“The 2022 audited financial statements of banks reflected the challenging operating environment of that year. Most banks reported significant mark-to-market valuation losses on their holdings of government bonds, along with higher impairments on loans and rising operating costs”, Dr. Ernest Addison said while addressing the banking sector’s performance during the 60th-anniversary launch of the Chartered Institute of Bankers Ghana in Accra last week.
However, Dr. Addison shared some positive news, stating that the banking sector’s data for the first half of 2023 showed improved performance, despite declines in some key financial soundness indicators. This improvement came after industry stakeholders reached a consensus on how to address the losses and with the timely introduction of temporary prudential and regulatory reliefs by the Bank of Ghana.
Prudential data revealed that banks had rebalanced their portfolios from medium- and long-term investments to short-term investments, with gradual increases in new loans. As of June 2023, the total assets of the banking industry amounted to GH¢242.4 billion, indicating a 21.2 percent annual growth compared to 22.8 percent growth in June 2022. This asset growth was primarily driven by investments, particularly in short-term investments, while medium to long-term investments declined.
Despite increased income levels, the banking sector saw rising costs, reflecting the challenges of the operating environment. However, the increase in costs did not outweigh earnings, resulting in a strong profit-before-tax for the first half of the year. Profits showed a remarkable 51.2 percent increase in June 2023 compared to the same period in the previous year. Similarly, the industry’s net income or profit-after-tax increased to GH¢4.3 billion from GH¢2.8 billion, representing a 51.4 percent increase in June 2023.
Overall, Dr. Addison indicated that the banking sector’s performance had improved in the first half of 2023.
He further noted that for the remainder of the year, the banking sector is expected to remain broadly stable, supported by regulatory reliefs and sustained growth in profitability.
