In its 8th Ghana Economic Update, the World Bank reported that over half of Ghana’s 23 banks are well-positioned to avoid the need for recapitalization.
Within just a year, most banks had achieved over two-thirds of the recapitalization target, initially set for completion in three years.
The Bank of Ghana expects that the early completion of these efforts will strengthen the banking sector’s resilience, enhancing its ability to support the real economy’s recovery.
The Bank of Ghana also noted that banks affected by the 2023 Domestic Debt Exchange Programme (DDEP) are following their approved capital restoration strategies in line with Central Bank guidelines.
The World Bank’s report highlights that the banking sector is now stronger and better capitalized than during the DDEP, with increased profitability despite some emerging risks.
Profitability has seen a significant boost, with return-on-equity after tax rising to 34.2% in December 2023, up from -34.4% in December 2022. Similarly, return-on-assets increased to 5.4% from -3.8% over the same period.
The Capital Adequacy Ratio (CAR) remained robust at 13.9% in December 2023, well above the revised prudential minimum of 10.0%.
However, the industry’s non-performing loan (NPL) ratio climbed to 20.7% in December 2023 from 16.0% in December 2022 and further increased to 25.7% by April 2024.
This rise is largely due to heightened credit risk stemming from the delayed impact of the 2022 macroeconomic crisis.
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