In 2023, Ghanaian banks experienced a dramatic turnaround in their profits before tax (PBT), soaring to GH¢11.8 billion from a loss of GH¢7.9 billion in 2022. This represents a staggering 249% improvement from the previous year.
A 2024 PwC report attributes this surge primarily to changes in how banks manage impairments and modifications. In 2022, banks had impaired investments worth GH¢4.2 billion. However, in 2023, they reported GH¢8.7 billion in write-backs and gains from modifications, marking a 307% increase.
Despite the substantial profit jump, the report noted that banks’ general and administrative costs rose by 19% due to high inflation. This indicates that the profit increase was largely driven by accounting adjustments rather than enhanced cost control.
Most banks improved their profit margins, except Prudential Bank, which saw a decline. Standard Chartered Bank (SCB) and Guaranty Trust Bank (GTB) had the best margins, exceeding the industry average. They were followed by Amalgamated Bank Ghana, Zenith Bank, and SBG, which also performed well.
The report highlighted that banks’ earning assets grew due to increased customer deposits and high-interest rates on loans and government securities. This growth helped profitability return to levels seen before the Domestic Debt Exchange Programme (DDEP).
While the cost of doing business for banks increased, it did not rise as sharply as their income. GCB Bank had the highest expenses, whereas GTB maintained low expenses, contributing to its strong profitability.
The net interest margin (NIM) for the banking industry grew slightly from 7.9% to 9.3%. First National Bank (FNB) had the highest NIM at 18.9%, with several other banks also showing improvement.
In terms of cost-to-income ratios, GTB made the most progress, reducing its ratio to 19%. While many banks improved their efficiency, some, like ABSA and FBN, saw their ratios worsen.
Overall, the significant profit increase was driven by accounting adjustments rather than improved cost management.
source: graphiconline.com
