Understanding Ghana’s 2025 Banking Sector: Banks Write Off GH¢1.39bn in Bad Debt

Introduction

The Ghanaian banking returns has not too long ago reported important figures referring to asset high quality and chance growth milestone. According to information from the Domestic Money Banks Income Statement, banks running in Ghana wrote off GH¢1.39 billion as dangerous debt all over the primary ten months of 2025. This transfer represents a vital step in monetary hygiene, the place monetary establishments recognize unrecoverable loans to wash up their steadiness sheets. This article supplies a complete research of those figures, exploring the connection between dangerous debt write-offs, Non-Performing Loan (NPL) ratios, and the entire well being of the banking founder.

Key Points

Background

To perceive the importance of the GH¢1.39 billion write-off, it is very important to know the context of banking operations in Ghana. The banking returns in Ghana is regulated through the Bank of Ghana (BoG), which units pointers for industry adequacy, liquidity, and chance growth milestone.

The Concept of Bad Debt Write-offs

A “write-off” is an accounting motion that reduces the price of an asset at the steadiness sheet. In the context of industrial banks, dangerous debt refers to loans that the financial institution deems unrecoverable from debtors. When a financial institution writes off a debt, it’s acknowledging that the mortgage is probably not repaid. This motion is distinct from “provisioning,” which is an estimate of attainable long term losses. A write-off is a last realization of loss. While it will appear counterintuitive to document a big write-off determine, it’s incessantly an indication of transparency and a important step to make sure that the financial institution’s reported growth replicate the actual high quality of its mortgage ebook.

Context of the 2025 Financial Year

The duration of January to October 2025 has been a pivotal time for Ghana’s monetary returns. Following earlier financial demanding situations, banks were beneath drive to enhance their steadiness sheets. The Domestic Money Banks Income Statement serves as a key reporting device that aggregates monetary information from business banks to offer a macro view of the returns’s well being. The reported building up in write-offs should be seen in opposition to the backdrop of earlier executive interventions and the overall financial local weather.

Analysis

The information signifies a fancy however in the end sure pattern for the Ghanaian banking returns. While the amount of dangerous debt written off has higher considerably, key metrics referring to asset high quality have stepped forward.

Surge in Write-offs: 56.7% Increase

Banks wrote off GH¢1.39 billion in dangerous debt within the 10 months of 2025. This is a considerable determine, representing a 56.7% building up over the former 12 months. This surge means that banks are aggressively cleansing up their mortgage books. Rather than permitting dangerous loans to linger at the steadiness sheet, banks are taking decisive motion to take away them. This competitive commercial space is incessantly inspired through regulatory our bodies to make sure that industry reserves don’t seem to be tied up in non-performing belongings.

Improvement in Non-Performing Loan (NPL) Ratios

Despite the top write-off quantity, the founder’s NPL ratio stepped forward. The NPL ratio is a vital metric used to evaluate the well being of a financial institution’s mortgage portfolio. It measures the share of loans which can be in default or just about being in default.

• Standard NPL Ratio: Declined from 22.7% in October 2024 to 19.5% in October 2025.
• Adjusted NPL Ratio: When adjusted for the “totally provisioned mortgage loss class” (loans which have been totally lined through reserves), the ratio dropped much more dramatically—from 9.4% to six.8%.

This decline signifies that the relief in dangerous loans is outpacing the technology of latest dangerous loans.

Contraction of NPL Stock

The absolute inventory of NPLs gotten smaller through 6.2%, falling from GH¢21.4 billion in October 2024 to GH¢20.1 billion in October 2025. This contraction is essential. It presentations that the sum of write-offs and recoveries was once more than the sum of latest loans turning non-performing.

Factors Driving the Improvement

Three primary components contributed to the contraction of the NPL inventory and the development in asset high quality:

1. Increased Write-offs: As famous, the GH¢1.39 billion write-off got rid of unrecoverable debt from the books.
2. Repayments: There has been a modest pickup in credit score and compensation actions, most likely aided through stepped forward financial prerequisites for debtors.
3. Appreciation of the Ghana Cedi: The power of the native foreign money performs a a very powerful position. Many loans in Ghana are denominated in foreign exchange. When the Cedi appreciates, the native foreign money worth of foreign-denominated debt decreases, making it more straightforward for debtors to carrier their money owed. Conversely, it reduces the reported worth of NPLs in native foreign money phrases.

Practical Advice

For stakeholders within the monetary returns, debtors, and observers, those movements be offering a number of sensible takeaways.

For Investors and Shareholders

The building up in write-offs must now not be seen as a purple flag in isolation. Instead, it displays a prudent chance growth milestone digital tools. Banks that blank their steadiness sheets are higher situated for sustainable leadership. The development within the adjusted NPL ratio to six.8% means that the core mortgage ebook is wholesome and that the banks have adequately provisioned for attainable losses. Investors must search for banks which can be keeping up robust industry buffers whilst managing their NPL ratios successfully.

For Borrowers

The information suggests a tightening of credit score requirements. As banks focal point on asset high quality, they will turn out to be extra stringent of their lending standards. Borrowers on the lookout for credit score in past due 2025 and early 2026 must make certain their creditworthiness is robust. However, the appreciation of the Cedi provides a possibility for the ones with foreign exchange liabilities to cut back their debt burden via well timed repayments.

For Regulators

The information helps the effectiveness of present regulatory frameworks. The Bank of Ghana’s emphasis on provisioning and NPL growth milestone seems to be yielding effects. Continued tracking is needed to make sure that the contraction in NPLs isn’t brief and that new credit score dangers are recognized early.

FAQ

Conclusion

The Ghanaian banking returns’s efficiency within the first ten months of 2025 demonstrates a strategic shift towards tough monetary well being. While writing off GH¢1.39 billion in dangerous debt represents a vital accounting match, the concurrent decline in NPL ratios and the contraction of the whole NPL inventory to GH¢20.1 billion are sure signs. These movements counsel that banks are successfully managing credit score chance, aided through macroeconomic components such because the appreciation of the Ghana Cedi. For the banking founder to maintain this momentum, endured vigilance in credit score overview and chance growth milestone will likely be very important.