Banks Face Profit Test as Rates Fall – PwC
Ghana’s banking sector is entering a new phase as declining inflation and falling interest rates reshape the operating environment for financial institutions, with profitability models built around high interest margins facing pressure.
A new survey by PricewaterhouseCoopers (PwC) Ghana has warned that banks must diversify their income sources and embrace digital, transaction-driven models to remain competitive as the economy transitions into a lower interest rate cycle.
The 2026 Ghana Banking Survey, themed “When Rates Recede: Sustaining and Returning Value in Ghana’s Banking Sector Through a Falling Interest Rate Cycle,” was presented at the PwC Ghana Banking Forum, which brought together industry executives, regulators and financial sector stakeholders.
PwC Ghana Country Senior Partner, Vish Ashiagbor, said macroeconomic stabilization recorded in 2025 was positive for the economy but would create a different challenge for banks.
He explained that commercial banks were moving away from an environment where high interest rates supported margins into a period that would test their ability to transform operations and create new sources of value.
The survey noted that monetary policy easing by the Bank of Ghana, driven by declining inflation, resulted in a reduction of more than 1,400 basis points in the Ghana Reference Rate, while average lending rates declined by about 600 basis points.
Although lower borrowing costs are expected to encourage private sector lending and support economic activity, PwC cautioned that reduced interest income could weaken banks’ profitability.
The report revealed that net interest income contributes nearly 70 percent of total banking sector revenue, highlighting banks’ dependence on traditional lending.
It also showed a shift in the composition of banks’ interest income. In 2015, loans accounted for 64 percent of net interest income, while investment securities contributed 33 percent. By 2025, government securities had become the dominant source, accounting for 55 percent, while loans contributed 38 percent.
PwC warned that increased dependence on government securities exposes banks to risks as Treasury bill yields decline.
The firm is urging banks to move towards ecosystem banking by expanding payment services, digital platforms, SME solutions, trade finance and advisory offerings.
Financial Services Leader at PwC Ghana, Kingsford Arthur, said banks could no longer rely mainly on interest margins for growth.
He encouraged institutions to develop capital-light revenue streams through technology-driven services.
PwC expects Ghana’s improving economic conditions to continue supporting the financial sector.
The firm, however, said banks that successfully diversify their income sources will be better positioned to outperform competitors as interest rates decline.
Mr Ashiagbor noted that the future of banking would depend on innovation rather than waiting for interest rates to rise again.
Institutions focusing on value-added services and digital platforms will emerge as leaders over medium term
