Banking Sector Soundness Remains Robust in 2024 Amid Strong Profitability, Adequate Capital Buffers
The overall soundness of Ghana’s banking sector remained robust in 2024, underpinned by strong profitability, adequate capital buffers, and enhanced operational efficiency, the 2024 Financial Stability Review has revealed.
The review, published by the Bank of Ghana, noted that the Banking Sector Soundness Index (BSSI) closed the year above its long-term trend, signalling a marked improvement in the sector’s resilience.
According to the report, this development reflects the impact of regulatory relief measures introduced under the Domestic Debt Exchange Programme (DDEP), a rebound in earnings, improved liquidity, and greater cost-efficiency within the sector.
However, it cautioned that key vulnerabilities persist, particularly the high stock of Non-Performing Loans (NPLs) and the undercapitalisation of a few banks. These risks are expected to ease with ongoing recapitalisation efforts, continued macroeconomic recovery, and improved risk management frameworks being implemented by banks.
Liquidity Conditions Improve
Liquidity conditions in the banking industry were broadly favourable in 2024. The ratio of broad liquid assets (comprising cash and investments) to total assets rose to 66.9% in December 2024, up from 65.7% in the same period of 2023.
Similarly, the ratio of broad liquid assets to short-term liabilities increased marginally from 79.5% to 80.1% over the same period, indicating the sector’s sustained ability to meet short-term financial obligations.
Cost Efficiency Returns to Pre-DDEP Levels
On the operational front, the sector’s cost-efficiency metrics showed considerable improvement. The cost-to-income ratio declined to 79.1% in 2024 from 80.1% in 2023, reversing the sharp deterioration recorded in 2022 when the ratio peaked at 120.8% due to DDEP-related adjustments.
The moderation in the ratio, the report noted, reflects a slowdown in operational expenditure growth and limited impairment charges associated with the ongoing Eurobond restructuring.
The central bank has reiterated its commitment to closely monitoring the sector and supporting initiatives aimed at bolstering stability, including the recapitalisation of vulnerable banks and enhancing supervisory frameworks.
