Ghanaian Banks’ Profitability to Fall Sharply on Lower Interest Rates – Fitch

Ghanaian Banks’ Profitability to Fall Sharply on Lower Interest Rates – Fitch

Ghanaian banks’ profitability is set to weaken considerably due to the impact of materially lower interest rates on net interest margins (NIMs), Fitch Ratings says.

However, profitability will remain high by regional standards and continue to be a strength of the banks’ standalone credit profiles, the global ratings agency said.

Inflationary pressures have decreased significantly due to the Bank of Ghana’s (BoG) tight monetary policy stance, Ghanaian cedi appreciation, fiscal consolidation and an improvement in food supplies.

Headline inflation declined to 9.4% in September, the lowest level in four years, from 11.5% in August.

This encouraged the BoG to cut the monetary policy rate (MPR) by 350bp to 21.5% on 17 September, following a 300bp cut in July. Fitch expects inflation to moderate further in the near term, averaging 8% in 2026 and prompting further MPR cuts.

Money market yields have declined significantly over the past year, with 91‑day T‑bill yields down to 10.2% in September 2025 from 25.1% in September 2024 due to excess liquidity and lower government cash financing needs.

T-bill yields may increase in the near term, but yields on open-market operation instruments issued by the BoG will decline. These instruments account for a substantial proportion of banking sector securities holdings and are issued closer to the MPR.

Lending rates will continue to fall as loans are mostly at variable rates. The banking sector’s NIM declined sharply to 11.4% in August 2025 from 14.8% in January 2025, and recent and future MPR cuts will put further pressure on profitability in 2025-2026.

These trends mark the end of a period of particularly wide NIMs, driven by the heightened interest rates that accompanied the sovereign debt restructuring launched in December 2022.

Wide NIMs have supported a recovery in the banking sector’s capital from the sovereign default, with the vast majority of banks likely to be capital-compliant when forbearance relating to losses on cedi government bonds expires at end-2025.

Fitch expects loan growth to increase significantly in the near term due to the lower yields on sovereign securities, the recovery in capitalisation, and cash reserve ratio requirements that incentivise higher loan/deposit ratios.

The conclusion of the sovereign debt restructuring, increasing real GDP growth, and lower inflation and interest rates will also help to stimulate loan growth following several years of particularly challenging economic conditions.

Fitch said the industry net loans represented just 19% of banking sector assets at the end of first half of 2025, providing scope to extend more credit as the economic environment improves.

The ratings agency, however, said increased loan growth will not be sufficient to offset the negative impact of sharply lower interest rates on NIMs. Ghanaian banks’ non-performing loan (NPL) ratios are likely to decrease significantly to comply with new BoG regulations from end-2026.

Fitch expects banks to accelerate write-offs to reduce these ratios to below 15% by end-2026 to avoid restrictions on dividends and bonus payments. This is likely to lead to increased loan impairment charges, compounding the impact of narrower NIMs on profitability in 2025-2026. Nigerian Treasury Bills Yield Dips, Excess Liquidity Fuels Rally