Banks rake in GH¢5.7bn profit

• In first eight months of the year

By Isaac AIDOO, Accra

BANKS’ profitability remained strong in the first eight months of 2023 with the industry recording profit-after-tax of GH¢5.7 billion, representing a 41.4% annual growth, compared with 26.5% growth recorded last year.

According to the Bank of Ghana (BoG), specifically, net interest income increased sharply by 37.9% to GH¢13.5 billion, while net fees and commissions went up by 27.3% to GH¢2.9 billion.

The banking sector remained stable as the industry’s total assets increased to GH¢244.7 billion in August 2023, from GH¢204.6 billion in August 2022.

 The growth in banks’ assets was funded by deposits, which grew sharply by 38.9 percent to GH¢189.9 billion from GH¢136.7 billion in the same comparative period.

Total borrowings by banks, however, contracted by 41.0 percent to GH¢13.9 billion in August 2023 from GH¢23.5 billion a year earlier.

The key financial soundness indicators remained broadly stable. Profitability indicators improved, with Return-on-Equity (ROE) at 36.9% in August 2023 from 23% in August 2022, while Return-on-Assets (ROA) increased to 5.4% from 4.7% in the same comparative period.

Trends in the Bank’s high frequency real sector indicators also pointed to a sustained turnaround in economic activity. The updated real Composite Index of Economic Activity (CIEA) contracted at a slower pace by 2.8% year-on-year in July 2023, indicating a slight improvement from a contraction of 3.1% in June 2023 and 3.7% in May 2023.

The main indicators that contributed to the slight recovery in the Index during the period were industrial consumption of electricity, private sector contributions to Social Security, and tourist arrivals. Credit to the private sector, cement sales, and port activity, however, slowed down over the period.

Also, liquidity indicators for  the industry improved during the period under review. Capital Adequacy Ratio (CAR) adjusted for the regulatory reliefs was 14.2% in August 2023, higher than the revised prudential minimum of 10%.

The industry’s NPL ratio however increased to 20.0% in August 2023, from 14.3% in August 2022, attributable to elevated credit risk associated with the lagged effect of the macroeconomic crisis in 2022.

In the first eight months of the year, the trade account registered a surplus of US$2.0 billion, compared with US$1.6 billion recorded in the same period of last year. This was largely due to import compression, and a decline in exports. Total exports earnings declined by 8.9 percent year-on-year to US$10.8 billion, driven mainly by a significant drop in crude oil and cocoa products exports. In the review period, crude oil exports decreased sharply by US$1.5 billion due to an 18.8 percent dip in production volumes as well as a 23.6 percent decline in prices. Exports of cocoa beans and products remained broadly unchanged at US$1.6 billion compared with the same period in 2022, as the higher production volumes of the beans balanced out the lower volumes of cocoa products.

Gold exports increased to US$4.7 billion, on account of an 8.5 percent rise in the volumes exported and 1.9 percent increase in prices. Earnings from other exports, including non-traditional exports, decreased marginally by 1.6 percent to US$2.1 billion. Total imports contracted by 14.7 percent to US$8.8 billion, from US$10.3 billion a year earlier. This was attributed to a 13.1 percent contraction in non-oil imports to US$6.1 billion, as well as a dip in oil and gas imports of 18.2 percent to US$2.7 billion.