Banks Could Strengthen Capital Position with Retained Earnings - GCB Capital

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GCB Capital has highlighted the potential for banks to bolster their capital position through retained earnings. Despite facing losses in 2022 due to the Domestic Debt Exchange Programme, banks managed to return to profitability in 2023.

Related To This: BoG To Reduce Policy Rate by 8% to 22% in 2024 - Fitch Reports

The analysis of key liquidity and profitability indicators indicates that banks are maintaining high levels of liquidity and profitability, despite significant credit risks. The report notes that financial institutions have directed their liquidity towards high-yielding money market instruments, given limited loan book expansion and a high-interest environment.

With the recent return to profitability, GCB Capital suggested that the immediate risks to recapitalization have decreased, as banks have the opportunity to capitalize on retained earnings over the next two financial years. 

Additionally, the establishment of the Ghana Financial Sector Stabilisation Fund (GFSF) and the commitment of $250 million from the World Bank are expected to provide alternative avenues for recapitalization.


The report also addressed concerns about asset quality, stating that they are likely temporary and that risks to banking sector resilience are broadly contained.

Banking Sector Performance Improves - BoG

The Bank of Ghana's January 2024 Monetary Policy Report revealed that the banking sector's performance improved in 2023, as adverse effects from domestic debt restructuring and macroeconomic challenges diminished. By the end of 2023, data indicated that the banking sector remained stable, liquid, and profitable.

The sector's profitability rebounded from the loss position recorded in the 2022 audited accounts, reflecting sustained increases in net interest income and fees and commissions. The industry's balance sheet was characterized as strong, marked by increased assets in December 2023, primarily funded by deposits.


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