Banks Rebound as Capital Adequacy Hits 17.5%

Ghana’s banking sector recorded a strong recovery in 2025, with capital buffers improving sharply and bad loans declining, signalling renewed stability across the financial system after years of macroeconomic stress and restructuring pressures.

According to the 2025 Banks’ Financial Performance Dashboard released by the Ghana Association of Banks, the industry’s Capital Adequacy Ratio (CAR) rose significantly from 14 per cent in 2024 to 17.5 per cent in 2025.

The improvement reflects stronger recapitalisation efforts, improved earnings performance and broader balance sheet restructuring across several banks that previously faced capital challenges.

The report noted that the gains remained strong even after excluding regulatory reliefs and concessions introduced during the sector’s recovery period.

Adjusted CAR, calculated without regulatory forbearance measures, increased sharply from 11.3 per cent to 17.5 per cent, suggesting that the sector’s recovery is becoming increasingly structural rather than policy-supported.

The banking industry’s rebound comes alongside improving macroeconomic conditions in Ghana’s economy.

Inflation reportedly declined to 5.4 per cent by the end of 2025, while the policy rate eased to 18 per cent amid improving price stability and lower borrowing costs.

Real Gross Domestic Product growth strengthened to 5.8 per cent, or 7.1 per cent excluding oil, supporting business activity and credit expansion across the economy.

Lending rates also moderated to 19.17 per cent, easing financing conditions for households and businesses after a prolonged period of elevated interest rates.

“Ghana’s banking sector entered 2025 on a recovery path after years of macroeconomic stress, including high inflation, elevated interest rates, exchange rate volatility, and rising credit risk,” the association stated in the report.

Asset quality also improved during the period.

The industry’s non-performing loan (NPL) ratio declined from 21.8 per cent in 2024 to 18.9 per cent in 2025, indicating improving credit risk conditions and stronger loan recovery performance across many institutions.

When the loss category was excluded, the NPL ratio dropped even further from 8.5 per cent to 5 per cent, reinforcing signs of improved underwriting standards and more effective credit management practices.

The report described the reduction in bad loans as one of the sector’s most important gains during the year.

“A key positive development is the broad decline in NPL ratios for a significant number of banks, indicating improved credit risk management, stronger loan recovery efforts, and better underwriting standards,” GAB noted.

Despite the broad recovery, the report acknowledged that conditions remain uneven across the sector.

While several previously undercapitalised institutions improved significantly through recapitalisation and retained earnings, a number of banks still recorded elevated bad loan ratios, highlighting pockets of continuing financial stress.

The association cautioned that further reforms and stronger institutional coordination would be required to improve loan recovery and strengthen financial stability across the industry.

“The persistence of relatively elevated non-performing loans in parts of the system highlights the need for stronger institutional coordination, particularly among regulators and the judicial system, to improve loan recovery and enforcement,” the report stated.

The sector’s aggregate balance sheet also expanded strongly during the year.

Total industry assets increased by 21.5 per cent to GH¢446.9 billion in 2025, up from GH¢367.8 billion in 2024.

Total deposits rose 17.8 per cent to GH¢325.3 billion, while total advances grew 16 per cent to GH¢111 billion.

Although growth rates moderated compared with the previous year, the association described the trend as a normalisation process consistent with a gradually stabilising financial system.

Profitability indicators, however, reflected some pressure from the lower interest rate environment.

The industry’s net interest margin declined from 14.2 per cent to 11.5 per cent as easing interest rates compressed the spread between lending and deposit rates.

Still, the association maintained that earnings capacity remained supported by improving operational efficiency, expanding balance sheets and stronger macroeconomic conditions.

Analysts say the latest figures point to a banking industry that is steadily rebuilding confidence after recent economic shocks, debt restructuring and currency volatility strained the financial sector.

However, they caution that sustaining the gains will depend heavily on continued macroeconomic stability, prudent regulation and stronger enforcement mechanisms within the financial system.

Looking ahead, the Ghana Association of Banks said the sector’s long-term performance would depend on maintaining a stable and predictable economic environment capable of supporting lending growth, investment planning and effective risk pricing.