The World Bank has reported that over half of the 23 banks operating in Ghana are well-positioned to avoid needing recapitalization.
According to the 8th Ghana Economic Update, most banks have already met more than two-thirds of their recapitalization targets, which were originally set for a three-year period.
The Bank of Ghana expects that completing these recapitalization efforts ahead of schedule will strengthen the banking sector, helping it better support the recovery of the broader economy.
The Bank of Ghana also noted that banks affected by the Domestic Debt Exchange Programme (DDEP) in 2023 are continuing to follow their approved capital restoration plans as per Central Bank guidelines.
The World Bank’s update highlighted that the banking sector is now stronger and better capitalized than it was during the DDEP, with improved profitability despite some emerging risks.
Bank profitability has significantly improved, with return-on-equity after-tax rising to 34.2% in December 2023 from -34.4% in December 2022. Return-on-assets also increased to 5.4% from -3.8% over the same period.
The Capital Adequacy Ratio (CAR) remained strong at 13.9% in December 2023, well above the revised minimum requirement of 10.0%, partly due to regulatory relief from domestic debt losses.
However, the industry’s non-performing loan (NPL) ratio increased to 20.7% in December 2023 from 16.0% in December 2022 and further rose to 25.7% by April 2024, mainly due to the delayed impacts of the 2022 macroeconomic crisis.
