By Adnan Adams Mohammed
Institutional investors navigating Ghana’s equity market are confronting a dual narrative for listed financial assets: while commercial banks absorbed a steep GH¢1.23 billion in bad loan write-offs during the first half of 2026, regulatory authorities report that systemic risks within the broader banking sector remain broadly subdued.
According to the Bank of Ghana’s (BoG) July 2026 Monetary Policy Report, macro-financial stability has continued to strengthen across the industry.
”Its macroprudential assessment at the end of June 2026 showed that systemic vulnerabilities within Ghana’s banking industry remain broadly subdued,” the central bank confirmed, highlighting that “macro-financial risks have continued to moderate amid improving macroeconomic conditions, declining sovereign risk perceptions, and strengthening investor confidence.”
De-Risking Strategy Clears Path for ROE Expansion
The central bank’s stability assessment comes alongside aggressive balance-sheet cleaning by commercial lenders. Data from the BoG’s Domestic Money Banks’ Income Statement shows that provisions classified under loan losses and depreciation rose 38% year-on-year from GH¢893.0 million in June 2025 to GH¢1.23 billion in H1 2026.
While the surge in write-offs created upfront impairment costs, equity analysts note that purging non-performing assets clears legacy drag, setting up banks for cleaner earnings and stronger long-term return-on-equity (ROE) metrics.
”The industry’s non-performing loan (NPL) ratio declined to 16.1% in June 2026 from 23.1% in June 2025,” the central bank reported. It added that balance sheet health is even higher when factoring in existing provisions: “Similarly, the NPL ratio, adjusted for the fully provisioned loan loss category, improved to 4.6% from 8.5% over the same period.”
Total bad debt on bank ledgers also trended downward. “The stock of non-performing loans decreased to GH¢19.9 billion in June 2026, compared with GH¢20.7 billion a year earlier,” the BoG documented, noting that “these developments point to an improvement in credit risk conditions, although asset quality vulnerabilities remain a concern.”
Strong Capitalization and Contagion Containment
From a systemic standpoint, regulator data indicates that contagion risks across lenders are well-contained, bolstered by industry-wide recapitalization drive and solid earnings performance.
”The banking sector continues to exhibit strong capitalisation, liquidity, profitability, and strong asset quality, with contagion risks remaining well-contained,” the regulator stated. “The financial soundness indicators in the first-half of 2026 generally strengthened… supported by recapitalisation efforts and sustained profitability across the industry.”
Monetary authorities also highlighted that the credit-to-GDP gap, while still negative, is “gradually improving, signalling a recovery in private-sector credit growth while indicating limited risks from excessive leverage.”
Private Sector Default Concentration Remains a Key Risk
For portfolio managers allocating capital between corporate credit and equity positions, risk exposure has shifted almost entirely to private-sector borrowers operating under tight financing conditions.
”The decomposition of NPLs continued to reflect the dominance of private sector credit in banks’ loan portfolios,” the central bank observed. “The private sector accounted for the largest share of NPLs, with its contribution rising to 98.0% in June 2026 from 96.4% in June 2025.”
In contrast, sovereign risk in bank portfolios has virtually evaporated. “The share of NPLs attributable to the public sector declined to 2.0% from 3.6% over the same period,” the report noted.
Investor Outlook
Looking into the second half of 2026, global macro volatility remains a factor to monitor. “Notwithstanding these favourable developments, downside risks arising from geopolitical tensions and potential external shocks warrant continued vigilance,” the central bank cautioned.
Nevertheless, regulator guidance concludes that “the banking sector’s outlook remains favourable, underpinned by strong capitalisation, sustained profitability, and a resilient financial position that enhances its ability to withstand emerging risks and support economic activity.”
For equity investors on the Ghana Stock Exchange (GSE), lower forward provisioning costs combined with subdued systemic tail risk present an increasingly compelling setup for banking valuations and dividend yields.
