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Financial Sector Resilience: Banks in Ghana Record Profits in Q1 2023

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The financial sector in Ghana has shown resilience in the first quarter of 2023 after suffering losses in the 2022 financial year due to the implementation of the Domestic Debt Exchange Programme (DDEP) and challenging economic conditions. However, 16 out of 23 commercial banks in the country suffered heavy losses amounting to over GH¢6bn at the end of 2022.

For the most part, the banking sector has managed to recover from the losses in the first quarter of 2023. Five banks, United Bank for Africa, Guaranty Trust Bank, First National Bank, Societe General Bank and Bank of Africa, posted profits while others managed to recover from their losses. Banks such as GCB Bank, Absa Bank, Zenith Bank, Standard Chartered Bank, Cal Bank, and Fidelity Bank, recorded impressive profits in Q1 after recording losses in 2022.

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GCB Bank, for instance, recorded a profit after tax of GH¢190m in Q1 2023, from a loss of GH¢555.8m in 2022. Similarly, Absa Bank, Zenith Bank, Standard Chartered Bank, Cal Bank, and Fidelity Bank bounced back from their loss positions to post impressive profits in Q1 2023. The losses were mainly due to the impairment of government bonds, which arose from the implementation of the DDEP, according to analysts.

Financial analysts suggest that the reversal of losses into profits could be due to changes in accounting practices, and the banks may have revised their assumptions around credit risk, which resulted in a lower estimate of impairments. However, without more information on specific banks and their financial performance, it’s difficult to determine what the main drivers were.

It is important to note that the banks are not out of the woods yet, as the full impact of the DDEP will be felt in the second quarter and towards the end of the year. Treasury managers and analysts caution that banks must remain vigilant and not take the Q1 profits as a guarantee of future earnings.

In a nutshell, the banking sector in Ghana has shown resilience, and it is commendable that most banks have managed to recover from their losses. However, it is important to monitor the sector and the impact of the DDEP closely. The recovery in Q1 2023 is a positive sign, and with proper management and cautiousness, the banks can maintain profitability in the future.

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