The banking industry recorded a 37.7% increase in profit, translating into GHS3.31 billion in 2019.

This is compared with the 12.5% growth recorded in 2018.

According to the January 2020 Banking Sector Report, the higher increase in the net income in 2019 was on the back of significant increases in both net interest income and fee and commission income outstripping the growth in operating expenses.

Net interest income grew by 23.6 % to GHs9.27 billion in 2019 compared to a marginal 1.5% growth recorded in 2018.

Net fees and commissions were, however, GHS2.24 billion in 2019, representing an uptick in growth of 15.3% compared to the growth of 14.6 per cent observed in 2018.

According to the composition of the banks’ income, the components of the banking industry’s income largely reflected the composition of its assets.

Interest income from investments was the largest with a share of 44.6% in total income in 2019 from 42.4% in 2018.

Interest income from loans was the second largest but its share marginally declined to 34.8% from 36.4%.

The third-largest income source for the banking industry, fees and commissions, accounted for 12.7% of total income in 2019, marginally above the 12.6% share in the prior year. The share of other income declined to 7.9% from 8.7% during the period under review.

Return on Assets and Return on Equity

According to the profit, the stronger profit outturn during the review period translated into higher profitability indicators, including the after-tax Return on Equity (ROE) and before-tax Return on Assets (ROA).

The sector’s ROE accordingly increased to 19.9% as at end-December 2019 from 18.5% in December 2018 while the ROA went up to 4.1% in December 2019 from 3.3% a year earlier.

Increases in both ratios signify enhanced resource utilisation of both shareholders’ funds and total assets.

Interest Margin and Spread

The banks’ interest spreads widened to 11.8% in December 2019 from 9.6% in December 2018 on the back of an increase in gross yield following the growth in earning assets (investments and credit) for the banks.

Gross yield for the banking sector increased to 17.9% from 15.5% during the review period reflecting in part, high yields on longer-dated instruments.

Interest payable on the other hand went up to 6.1% from 5.9% over the same comparative period