The Bank of Ghana claims that profitability levels in the banking industry have decreased.
This was ascribed by the central bank to higher loan impairments, larger mark-to-market losses on investments, and growing operating costs.
The Bank of Ghana stated in a statement that “profit-after-tax was GH3.9 billion at the end of December 2022, representing 18.9 percent contraction year-over-year, compared to 12.3 percent annual growth reported in 2021.”
It further stated that compared to 2021, net interest income increased by a greater rate of 23.0 percent, to GH15.8 billion.
“From the growth of 24.8% seen in 2021, net fees and commissions increased by 27.4% to GH3.7 billion.
In addition, operating income climbed by 30.9 percent from the 14.6 percent seen a year earlier.
The robust operational income result for the year, according to the Central Bank, was nonetheless reduced by rising operating expenses and provisioning.
“In comparison to December 2021, operating expenses increased by 14.2 percent in 2022.
Due to the rapid acceleration in credit growth, elevated credit risks, and impairments on assets, provisions also climbed significantly by 184.0 percent in December 2022 compared to a contraction of 4.7 percent a year earlier.
“As a result, earnings before tax decreased by 13.5 percent to GH6.4 billion in December 2022, as opposed to a 22.1 percent annual growth in December 2021.
In comparison to 2021, when new loans and advances climbed by 6.8%, in 2022 they increased to GH53.7 billion, representing a growth of 47.5 percent annually.
The return on equity and return on assets, which measure a sector’s profitability, both fell over the period, according to the central bank’s statement, in accordance with falling profit after tax and profit before tax, respectively.
According to the report, significant credit growth in comparison to the increased stock of non-performing loans (NPLs) between December 2021 and December 2022 resulted in an improvement in the non-performing loans (NPL) ratio to 14.8% from 15.2%.
Additionally, it stated that there were inconsistent trends in financial soundness indicators, reflecting the increased risks the sector was facing.
The industry’s capital adequacy ratio (CAR), which was 19.6% in December 2021 but was 16.6% as of December 2022, was “attributed to losses on mark-to-market investments, increase in risk-weighted assets of banks from the high growth in actual credit, and the price effect of the depreciation of the Ghana Cedi on foreign currency denominated loans,” the apex bank continued.