Private banks in Ghana have demonstrated stronger resilience in the face of shocks from the Domestic Debt Exchange Programme (DDEP), relying on internal earnings to rebuild capital. In contrast, some state-owned banks have required direct government injections to stay afloat.
The DDEP, launched in December 2022, forced significant losses on banks due to their heavy exposure to government bonds. Capital positions were weakened across the sector, prompting the Bank of Ghana (BoG) to step in with regulatory forbearance. This included scrapping the 3% capital conservation buffer, reducing the minimum capital adequacy ratio to 10% from 13%, and phasing bond-related losses over four years from end-2022.
These measures offered temporary breathing space, but Fitch’s findings reveal that not all banks managed the risks equally. Private banks, less reliant on external support, showed an ability to withstand shocks by leveraging strong profitability from high-yield treasury bills, low credit growth, and the cedi’s sharp appreciation. The currency’s rise helped reduce the burden of foreign-currency-denominated assets, shoring up their solvency and strengthening balance sheets.
Meanwhile, some government-owned banks, already undercapitalised, proved more vulnerable. Despite earlier injections, Fitch warned they may still require additional support before end-2025. The agency noted that six banks in total are unlikely to meet capital requirements through internal earnings alone, exposing ongoing risks despite regulatory relief.
The sector’s tangible common equity to tangible assets ratio improved to 10.3% at end-1Q25 from 7.4% at end-2022, reflecting overall recovery. But the contrast between private and state-owned lenders highlights an important trend: resilience to risk has not been uniform. While private banks have managed to restore capital organically, state-owned peers remain more exposed to shocks and dependent on government backing.
What this means is that Ghana’s banking system, though broadly stabilised, is still split between lenders able to stand on their own and those leaning on state support. For investors, it points to growing confidence in the private banking segment, while also underlining that fiscal risks remain tied to undercapitalised state banks if new shocks occur before end-2025.
