Ghanaian banks’ profitability minimizes DDEP impact – Fitch

Fitch Solution, an international rating agency, has indicated that the Domestic Debt Exchange Programme (DDEP) minimised the profitability of Ghanaian banks.

The rating agency said Ghanaian banks’ heightened profitability was driven by exceptionally high yields on Treasury bills, which helped a recovery in capitalization from the large losses due to Ghana’s domestic debt exchange programme in early 2023.

The rating agency said it expected profitability to remain strong in 2024 as Treasury bill yields stayed high despite decreasing from their peak.

The agency also attributed the profitability to the capital-raising initiatives encouraged by the Bank of Ghana (BoG), which it said will continue to support the recovery in capitalization.

According to the rating agency, the banking sector reported extremely strong profitability in 2023, driven by net interest margins (NIMs) benefiting from the exceptionally high Treasury bill yields since the debt exchange was launched.

The rating agency said this was possible despite incremental impairment charges from the sovereign debt exchange and higher loan impairment charges due to an increasing non-performing loans (NPLs) ratio, which ended in 2023 at 20.7 percent as against 14.8 percent in 2022. 

The rating agency said that with dividend payouts likely to be limited, the strong earnings should support a significant improvement in capital at the end of 2023.

The Ghanaian government initiated the Ghana Domestic Debt Exchange Programme on December 5, 2022.

This initiative invited the voluntary exchange of roughly GH¢137 billion worth of domestic notes and bonds of the Republic, such as the Dakye and E.S.LA bonds, for a bundle of new bonds.

Source: GNA