The profit in the banking industry has declined by approximately 20% according to the Bank of Ghana (BoG).
The profit in the banking industry has declined by approximately 20% according to the Bank of Ghana (BoG).
According to the Bank of Ghana, the profitability in the banking industry has decreased. The decrease is attributed to factors such as market-to-market losses on investments, elevated impairments on loans, and increasing operating expenses. The Bank of Ghana’s statement showed that the profit-after-tax was GH¢3.9 billion at the end of December 2022, which is a 18.9% decrease from the previous year, compared to the 12.3% annual growth in 2021. The statement also stated that the net interest income grew by 23.0% to GH¢15.8 billion, surpassing the 14.5% growth in 2021.
According to the Central Bank, net fees and commissions grew by 27.4 percent to GH¢3.7 billion from 24.8 percent in 2021. The increase in operating income was also noted, rising by 30.9 percent compared to 14.6 percent the previous year. However, the growth in operating income was moderated by the increased operating expenses and provisions. Operating expenses increased by 32.2 percent in December 2022, compared to 14.2 percent growth in 2021. The sharp increase in provisions by 184.0 percent in December 2022 was due to the significant increase in credit growth, heightened credit risks, and impairments on investments, compared to a contraction of 4.7 percent a year earlier.
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The central bank reported that the profit before tax saw a drop of 13.5 percent to GH¢6.4 billion in December 2022, compared to the 22.1 percent growth in the previous year. Despite this, the new loans and advances in 2022 rose to GH¢53.7 billion, with an annual growth of 47.5 percent, compared to the 6.8 percent growth in 2021. The bank also stated that the return on equity and the return-on-assets also decreased during this time, in line with the decrease in profit after-tax and profit-before-tax. However, the non-performing loan ratio improved to 14.8 percent in December 2022, compared to 15.2 percent in December 2021, due to high credit growth and the growth of NPLs between the two periods.
The central bank stated that the indicators of financial stability showed conflicting results, indicating the heightened dangers faced by the industry. The Capital Adequacy Ratio (CAR) fell to 16.6 percent as of December 2022, but still remained above the necessary minimum of 13 percent, due to losses in mark-to-market investments, a rise in risk-weighted assets from increased credit growth, and the impact of the devaluation of the Ghana Cedi on loans denominated in foreign currency.
