The 24 banks, currently operating in the country, registered an after-tax profit of GH¢1.1 billion, representing a year-on-year growth of 38.9 percent compared with 5.8 percent growth for the same period last year.
The profit margin is a remarkable growth, after the clean-up of the banking industry.
Majority of the profits were recorded largely by the tier-one and tier-two banks.
They include Ecobank Ghana, GCB Bank, Barclays Bank, Zenith Bank, Stanbic Bank, Stanchart, Cal Bank and UBA. According to the May 2019 Banking Sector Report, the higher growth in net profit was underpinned by higher growth of net interest income during the review period. Net interest income grew by 21.6 percent on account of higher interest income from investments and lower interest expenses from reduced borrowings on the back of increased deposits mobilized.
Net fees and commissions moderated to 4.3 percent compared with 20.0 percent growth in the same period last year, attributable to the slowdown in the volume of off-balance sheet activities. Operational expenses grew by 9.5 percent, higher than the previous year’s growth of 3.6 percent.
The report added that in summary, the sector’s profitability performance was enhanced by strong net interest income and cost control
Return on Assets & Return on Equity
According to the report, the improved profitability levels during the period under review positively reflected in the main indicators, namely, after tax Return on Equity (ROE) and before-tax Return on Assets (ROA).
The ROE computed as a ratio of after-tax income to average shareholders’ funds increased to 18.9 percent in April 2019 from 17.3 percent in April 2018. Similarly, the ROA measured as the ratio of income before-tax to average total assets increased to 4.1 percent from 3.6 percent during the same comparative period, pointing to improved profitability within the banking industry.
Composition of Banks’ Income
The report emphasized that the composition of banks’ income broadly reflected the shares of the various components of total assets. Thus, the share of investments income in banks’ income rose with its share in total assets.Investments (both short and long-term) constituted the largest source of income for banks, with its share increasing to 44.5 percent in April 2019 from 42.6 percent in April 2018.However, the share of income from loans declined to 34.7 percent from 38.0 percent during the period under review, following the decline in the size of loans in the industry’s assets.The share of banks’ income from commissions and fees also declined to 12.0 […]