Positive signs of recovery in the country’s banking sector are being seen, Bank of Ghana (BoG) Governor Dr. Ernest Addison has said.
During a press briefing at the 112th Monetary Policy Committee (MPC) meeting this week, Governor Addison said despite the Domestic Debt Exchange Programme’s (DDEP) impact and overall difficult operating environment that affected banks’ financial performance, the sector witnessed a turnaround in performance during the first four months of 2023 following closure of the DDEP.
Prudential data, according to the BoG Governor, in the first four months of this year showed some turnaround in the banking sector’s performance following conclusion of the DDEP.
He added that banks have begun rebalancing their portfolios, shifting away from medium-to-long-term investments and increasing their focus on short-term investments and new loans.
This comes after the audited financial statements for 2022 brought to light substantial losses incurred by banks. These losses primarily stemmed from mark-to-market valuation losses on government bonds, which was a consequence of implementing the DDEP (Dynamic Discounted Expected Provisions).
Additionally, the banks faced increased impairments on loans and rising operating costs – contributing further to their financial setbacks.
In 2023, most banks returned to profitability; with higher operating income contributing to a 47 percent increase in profit-before-tax for April 2023 compared to the same period last year.
In the first four months of 2023, the sector witnessed positive growth with its return-on-assets increasing from 4.7 percent to 5.5 percent. Similarly, the return-on-equity experienced an upward trend, rising from 22.3 percent to 36.3 percent.
Governor Addison is resolute that the sector’s recovery in the first four months of 2023 demonstrates resilience and a positive outlook, but added continued efforts are needed to address remaining challenges and ensure sustained growth.
It has emerged that a comprehensive strategy to revive the nation’s financial sector is being readied for the end of June, as part of the US$3billion facility being provided by the International Monetary Fund.
The proposed reforms aim to strengthen the sector, restore market confidence and promote lending to the private sector – while commercial banks, special deposit-taking institutions and other regulated entities must submit plans for recapitalisation.
