Ghana’s banking industry is facing significant challenges, marked by a concerning non-performing loan (NPL) ratio of 21.8% and a Capital Adequacy Ratio (CAR) of 14.0%, according to Fitch Solutions.

The report attributes these vulnerabilities to the domestic debt exchange programme (DDEP) and elevated interest rates. In a recent analysis titled “US Tariffs Increase Risks for SSA Banks,” Fitch noted that Ghana has the highest NPLs among the ten largest countries in Sub-Saharan Africa, while its CAR ranks as the third weakest in the region.

Despite these looming challenges, the report suggests that banks across Sub-Saharan Africa are generally well-positioned, buoyed by strong capital adequacy ratios and satisfactory loan quality.

“We expect to see improvements in capital across various sectors, driven by regulatory advancements in markets such as Nigeria and Kenya, alongside better economic conditions in many areas,” the report stated.

“Our fundamental outlook remains that interest rates will decline in 2025 for most markets, which should help enhance loan quality. Substantial profits following significant interest rate hikes in recent years will also provide banks with a solid reserve for 2025,” it added.

The report further indicated that US tariffs could affect Sub-Saharan African banks in terms of monetary policy, leading to increased uncertainty as policy expectations evolve.

“If interest rates remain elevated for a longer period than we currently anticipate, this could negatively impact loan quality and growth, potentially hindering credit extension if consumers and businesses continue to feel uncertain about interest rates,” it cautioned. While higher interest margins currently exceeding 50% in all major Sub-Saharan African banking sectors except Nigeria could enhance profits, this benefit may be counterbalanced by sluggish loan growth and the need for increased provisions for higher NPLs.

Conversely, a more rapid decline in interest rates due to economic growth concerns could reverse these trends.

Fitch Solutions concluded that this uncertainty complicates strategic planning for banks in the region, affecting risks related to loan quality, lending activities, and income derived from interest as well as fees and commissions.