Banks profit soar to GH¢2.24 billion after banking reforms

The Bank of Ghana’s latest Banking Sector Report has revealed that commercial banks were able to make in excess of GH¢2.24 billion in the first eight months of 2019.

According to the report, the industry recorded an after-tax profit of GH¢2.24 billion, a 38.4 percent growth over profits recorded by the banking sector for the same period last year.

The report stated that the profit performance is attributable to the 26 percent growth in the income the industry made from interest on borrowings to individuals and institutions as well as growth in the fees and commissions banks charge for services rendered.

The September 2019 Banking Sector Report shows that significant gains have been made since the onset of the banking sector reforms two years ago.

The central bank’s reforms led to the collapse of 9 banks which were cited for various regulatory breaches. The nine banks were Capital Bank, UT, Sovereign, Beige, Construction, Premium, Heritage, Royal and Unibank.

Aftermath of reforms

The Bank of Ghana report stated that the reforms have led to a well-capitalized, solvent, liquid and profitable banking sector with improved financial soundness indicators.

“Asset growth is robust, underpinned by sustained growth in deposits and higher capital levels while credit has continued to recover compared to the same period last year. Bank profitability has also improved on the back of increased business and cost savings,” the report stated.

The strong profit outturn during the review period translated into improved banking sector profitability indicators as reflected in the main indicators, namely, after-tax Return on Equity (ROE) and before-tax Return on Assets (ROA).

The sector’s ROE, computed as a ratio of after-tax net income to average shareholders’ funds increased to 20.9 percent in August 2019 from 16.9 percent in August 2018 while the ROA, measured as the ratio of net income before-tax to average total assets increased to 4.3 percent from 3.3 percent during the same comparative period.

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