Fitch Warns of Profitability Pressures on Banks as Interest Rates Fall
The profitability of Ghanaian banks is expected to weaken sharply as materially lower interest rates erode net interest margins (NIMs), according to Fitch Ratings.
The credit rating agency noted, however, that despite the anticipated compression in margins, Ghanaian banks will remain highly profitable by regional standards — a factor that will continue to underpin their standalone credit strength.
Fitch observed that the decline in profitability prospects reflects a broader easing in Ghana’s macroeconomic environment, driven by moderating inflation, improved currency stability and tighter fiscal management.
Inflation Eases, Policy Rate Cut Deepens
The firm highlighted that headline inflation fell to 9.4% in September 2025, the lowest in four years, from 11.5% in August, as inflationary pressures subsided on the back of the Bank of Ghana’s (BoG) tight monetary stance, appreciation of the Ghanaian cedi, fiscal consolidation and improved food supply.
Encouraged by the disinflation trend, the BoG cut its monetary policy rate (MPR) by 350 basis points to 21.5% on 17 September 2025, following a 300bp reduction in July, Fitch said. The agency expects inflation to moderate further in the near term, averaging around 8% in 2026, which could prompt additional policy rate cuts.
Falling Yields Reflect Improved Liquidity
Money market yields have also fallen significantly over the past year amid excess liquidity and reduced government financing needs. The 91-day treasury bill yield dropped to 10.2% in September 2025 from 25.1% a year earlier.
Fitch added that while short-term T-bill yields could edge higher in the near term, yields on open market operation (OMO) instruments issued by the BoG are expected to decline further. These instruments, which are issued close to the policy rate, make up a substantial share of the banking sector’s securities portfolios.
The decline in market yields, coupled with the BoG’s easing cycle, suggests that banks’ interest income will come under sustained pressure in the coming quarters, even as credit growth and asset quality stabilise.
