Aggressive Policy Rate Cuts in 2026 to Compress Bank Profit Margins, Warns Black Star Group
Commercial banks are expected to face margin pressures in 2026 as the Bank of Ghana moves to aggressively cut its policy rate in the first half of the year, narrowing the wide gap between the current policy rate and Treasury bill yields, according to Black Star Group’s 2026 Economic Outlook: The Growth Pivot.
The report points to a significant spread between the Monetary Policy Rate of 18.0% and prevailing T-bill rates of about 10.6%, which it says weakens the monetary transmission mechanism and necessitates sharp adjustments.
“Given the massive spread between the current Policy Rate (18.00%) and market T-Bill rates (10.6%), we project aggressive cuts in H1 2026 to realign the transmission mechanism, followed by a strategic ‘Hold’ in H2 2026 as liquidity from the ‘Big Push’ enters the system,” the report stated.
Black Star Group noted that the strong profitability recorded by banks in 2025 is unlikely to be sustained under a lower interest rate environment. The banking sector’s profit-before-tax rose by 46.1% to GH¢9.7 billion (from GH¢6.7 billion in the prior year) in the first eight months of 2025, largely driven by elevated interest rates and strong bond market performance.
However, this trend is expected to slow in 2026 as yields decline.
“Without aggressive lending, we believe banks’ Net Interest Margins face compression as lending rates fall faster than funding costs,” the report cautioned.
As government securities become less attractive due to falling yields, the report said banks will be compelled to reduce their heavy reliance on government paper as a primary driver of profitability.
Instead, Black Star Group sees opportunities emerging from the fiscal stance outlined in the 2026 Budget, particularly its emphasis on high capital expenditure.
“The 2026 Budget’s high capital expenditure implies a multiplier effect that will increase demand for credit, providing banks with an opportunity to leverage and kickstart the pivot to aggressive lending amid stabilising macroeconomic indicators,” it said.
The report recommends that banks expand loan volumes, with a focus on key GDP subsectors expected to drive growth in 2026, including ICT, agriculture and corporate banking. It also noted that non-performing loans are projected to stabilise in 2026, citing IMF expectations.
In addition, trade finance was highlighted as a key growth area, with banks positioned to take advantage of the strong appreciation of the cedi to support import financing for the manufacturing and retail sectors.
Overall, the Black Star Group said 2026 will mark a turning point for banks, from yield-driven earnings to balance-sheet growth anchored on lending and real sector expansion.
