Post DDEP: Banks rebound

Banks in the country have made a remarkable comeback in 2023 after a difficult 2022 which saw 16 out of the 23 banks recording significant losses.

The 2023 financial results released by 20 out of the 23 banks show a return to profitability of the sector, largely driven by increased income from banks’ investment in securities.

A Graphic Business analysis of the results indicates that the total investment securities of the 20 banks grew by almost 50 per cent from GH¢60.22 billion in 2022 to over GH¢90 billion in 2023.

This helped push total profit for the year under review to GH¢9.5 billion, up from the GH¢424.88 million recorded in 2022.

The results also show that all the 20 banks recorded huge increases in total deposits and total assets. 

Total deposits grew from GH¢155.01 billion in 2022 to GH¢205.25 billion in 2023, with total assets also increasing from GH¢197.86 billion in 2022 to GH¢259.01 billion in 2023.

As at going to press, Agriculture Development Bank (ADB), Universal Merchant Bank (UMB) and National Investment Bank were yet to publish their end of 2023 financial results.

Banks, some of which had between 30 to 50 per cent of their net funds in government securities, were hardly hit in 2022 by the Domestic Debt Exchange Programme which saw the government swap bonds worth GH¢82 billion for 12 new ones at reduced coupon rates and longer tenors.

Although the banks were given a three-year period to recover from the losses, it appears majority of the them have already recovered, with 16 banks recording profits in 2023.

Although four banks recorded losses, the losses recorded were an improvement of the losses that was recorded in 2022.

Profitable banks 

Stanbic Bank Ghana emerged as the most profitable bank, posting a profit of GH¢1.28 billion in 2023, after recording a loss of GH¢62.59 million in 2022.

This was followed by ABSA Bank, with a profit of GH¢1.13 billion, compared to a loss of GH¢429.10 million in 2022.

The rest are GCB Bank (GH¢994.10 million); Standard Chartered Bank Ghana (GH¢864.39 million); Fidelity Bank (GH¢750.82 million); GT Bank (GH¢725.78 million); and Zenith Bank (GH¢676.10 million).

Ecobank Ghana (GH¢619.47 million); Access Bank Ghana (GH¢618 million); and UBA (GH¢588.6 million) make the list of the top 10 most profitable banks in 2023.

Although Consolidated Bank Ghana made a loss of GH¢542.9 million, that was an improvement over the 2022 losses of GH¢1.5 billion.

CAL Bank also improved on its 2022 losses of GH¢815.20 million by recording a loss of GH¢680.27 million.

Prudential Bank (GH¢268.65 million) and First National Bank (GH¢2.56 million) are the other two banks who recorded losses.

Largest bank

In terms of assets, Ecobank Ghana maintained its position as the largest bank in the country, with assets totalling GH¢33.52 billion, followed by GCB Bank with GH¢26.9 billion.

This was followed by Stanbic Bank Ghana (GH¢24.63 billion); ABSA Bank Ghana (GH¢21.49 billion); Fidelity Bank (GH¢17.22 billion); Standard Chartered Bank Ghana (GH¢13.92 billion); and Zenith Bank (GH¢13.86 billion).

Consolidated Bank Ghana (GH¢13.69 billion); UBA (GH¢12.87 billion); and Access Bank Ghana (GH¢12.30 billion), complete the list of the top ten largest banks in the country in terms of assets.

Recapitalisation

With the DDEP also affecting the capital of some of the banks, the Bank of Ghana gave the banks a period of three years to recapitalise to pre DDEP levels.

It, however, appears, most of the banks have already recapitalised or in the process of doing so ahead of the three-year window.

At the 116th Monetary Policy Committee press conference, the Governor of the Bank of Ghana, Dr Ernest Addison, said the banks were way ahead of their recapitalisation plans and were in line to restore their capitals before the 2026 deadline.

He said looking at the 2023 performance of the banks so far, it had become clear that a lot of them could even recapitalise from the profits they made in 2023.

He said there was therefore no cause for alarm, as banks continue to demonstrate their strength and resilience.

“From what we have seen from the current data, a lot of them will be able to fill the gaps from the profits they made from 2023 so the situation has improved.”

“They are doing much better than we anticipated. We have given them up to 2026 to recapitalise but they are way ahead of their plans,” he stated.

Issues with NIB, UMB, ADB

It will be recalled that quite recently, the BoG appointed Dr Joseph O. France as an advisor to the management of Universal Merchant Bank LTD (UMB) effective March, 25 2024.

The advisor is expected to help monitor UMB’s recapitalisation efforts and implementation of governance reforms agreed with the central bank.

The advisor is also expected to be at post at UMB until otherwise advised by the Bank of Ghana and will furnish the central bank with a status report on the UMB as frequently as it may require.

With regard to the NIB, following the completion of the financial sector reforms, all the banks operating in the country successfully recapitalised to GH¢400, except NIB, who are yet to do so.

The bank, together with four other banks, namely ADB Bank, OmniBSIC, UMB Bank and Prudential Bank, were given government guarantee through the Ghana Amalgamated Trust (GAT), which was a special purpose vehicle set up to help these five banks recapitalise.

NIB, however, failed to utilise this opportunity as its liquidity and capital challenges far exceeded what was originally envisaged and have still remained under-capitalised. 

With the bank being a state bank, the considerations were different, and, therefore, the bank has continued to operate till now, despite not meeting the new minimum capital requirement.

The government has, however, given an assurance recently that it would recapitalise the bank after assessing its viability.

On ADB PLC, the shareholders of the bank in December 2023 granted approval for a record capital injection of GH¢2billion into the bank to strengthen its operations.

Tackling NPLs 

In an interview with the Graphic Business on the banks’ 2023 performance, Banking Consultant, Dr Richmond Atuahene, said the sector made a quick recovery from the DDEP losses because the BoG absorbed some of the losses which were originally expected to be taken by the banks.

He said that meant the impact of the DDEP was not as severe as initially anticipated.

Dr Atuahene said although the banks were back to profitability, it was still necessary for the government to settle its indebtedness to contractors to enable them to pay back their loans to the banks.

He said this would help the banks recover some of the non-performing loans (NPLs) on their books.

Using NIB as an example, he said the bank would be liquid and would not even need government recapitalisation if the government settles its GH¢1.2 billion debt to contractors who owed the bank.

Ghana has historically recorded high levels of NPLs in the banking sector, with NPLs reaching a record high of 24 per cent in 2023.

According to Demirguc-Kunt and Detragiache (1997), any banking industry whose NPLs exceed 10 per cent is in crisis. 

Dr Atuahene said the country’s banking sector was therefore in a fully fledged crisis as a result of general repayment challenges on the part of borrowers reflecting general weak macro-economic imbalances in the form higher inflation, higher policy rates associated with higher lending rates, persistent depreciation of the local currency against the major trading currencies, higher energy cost and harsh business environment.