Banks recorded ¢6.6bn losses in 2022; but registered ¢2.8bn profit in 4 months of 2023 – BoG

Banks in Ghana recorded ¢6.6 billion in losses in 2022, a statement from the Monetary Policy Committee (MPC) of the Bank of Ghana has revealed.

This is compared to a profit of ¢4.8 billion recorded in 2021.

According to the Bank of Ghana, the 2022 audited financial statements of banks reflected the full impact of the Domestic Debt Exchange Programme (DDEP) and the challenging operating environment that prevailed in the year.

It added that most banks reported significant losses on the back of the mark-to-market valuation losses on their respective holdings in Government of Ghana bonds, following the implementation of the DDEP. Other losses were also due to higher impairments on loans and rising operating costs.

The main profitability indicators, namely, return-on-assets and return-on-equity all turned negative in 2022 because of the industry’s loss position.

But the 2022 audited financial statements of banks pointed to some impairments in capital levels, although most banks posted Capital Adequacy Ratios (CAR) above the 10% regulatory minimum at end-December 2022.

This was attributed to the effect of the roll-out of the temporary regulatory reliefs extended to the banks to cushion them against the impact of the DDEP as was done at the onset of the pandemic.

Banks recover swiftly to register ¢2.8bn profit in 4 month of 2023

Meanwhile, the banks recovered swiftly from their loss position to record ¢2.8 billion in the first four months of 2023. This represented 45.8% year-on-year growth.

The industry’s return-on-assets also increased to 5.5%, from 4.7%, while return-on-equity rose to 36.3%, from 22.3%.

Key financial soundness indicators remained strong on the back of the impact of the regulatory reliefs. The industry’s Capital Adequacy Ratio, adjusted for the regulatory reliefs was 14.8% in April 2023, higher than the revised prudential minimum of 10%, but lower than the 21.3% recorded in April 2022.

The decline in the ratio the Central Bank said highlights the increase in risk-weighted assets of banks from the impact of exchange rate changes and some losses on mark-to-market investments.

The banking industry’s Non-Performing Loans (NPL) ratio deteriorated to 18.0% in April 2023, from 14.3% in April 2022, reflecting higher loan impairments and elevated credit risks.

The Central Bank added that the industry’s liquidity indicators have improved following the implementation of the revised Cash Reserve Requirement.

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