Ghana’s banking sector is still in the midst of a slow, data-heavy balance sheet repair cycle, with fresh evidence that credit risk is being actively absorbed rather than fully resolved.
Banks wrote off GH¢394.8mn in bad loans in February 2026, up 43.4 per cent from GH¢275.2mn in the same period of 2025, according to the Bank of Ghana’s March 2026 Monetary Policy Report.
The increase in write-offs signals a more aggressive recognition of impaired assets, suggesting that banks are moving legacy credit problems off their books at a faster pace rather than carrying them forward.
The provisioning burden remains embedded in earnings dynamics. The write-offs—reflected across loan losses, depreciation charges and bad debt expenses in domestic money bank income statements—point to continued earnings drag from legacy exposures, even as the sector stabilises on other fronts.
In effect, profitability is being partly shaped by how quickly banks choose to clean up historical lending cycles.
Elevated write-off numbers
Yet beneath the elevated write-off numbers, headline asset quality indicators are improving on multiple fronts.
The non-performing loan (NPL) ratio fell sharply to 18.4 per cent in February 2026, down from 22.6 per cent a year earlier, representing a 420-basis-point improvement year-on-year.
On a net basis—excluding fully provisioned loans—the improvement is even steeper, with the NPL ratio dropping to 5.4 per cent from 8.9 per cent, a 350-basis-point decline.
NPL ratios
This divergence between gross and adjusted NPL ratios is significant. It suggests that a large portion of Ghana’s bad loan stock is increasingly being absorbed through provisioning and write-offs, rather than new credit deterioration alone.
In other words, the system is not necessarily generating fewer bad loans—but it is clearing them more efficiently from the balance sheet.
This is reinforced by movements in absolute stock levels. Total non-performing loans declined by 5.8 per cent to GH¢19.9bn in February 2026, reversing a 14.9 per cent expansion in the same period a year earlier.
The shift from double-digit expansion to contraction is a key inflection point, indicating that asset clean-up efforts are now outweighing new inflows of impaired credit.
However, the composition of remaining risk exposes a structural imbalance. The private sector accounted for 98.1 per cent of total NPLs, up from 96.2 per cent a year earlier, while the public sector share fell to 1.9 per cent from 3.8 per cent.
This near-total concentration of impaired assets within the private sector is statistically significant: it implies that sovereign-linked lending risk has been largely contained, while corporate and household credit remains the dominant source of systemic stress.
Risk declines
The shift also suggests that credit risk is becoming more sectorally concentrated even as aggregate risk declines.
Banks are effectively exiting or cleaning up public-sector exposures while retaining—and in some cases restructuring—private-sector loans that remain under pressure from high borrowing costs, uneven recovery in corporate earnings, and lingering macroeconomic tightness.
Taken together, the data points to a banking system undergoing what can best be described as a “provision-led deleveraging phase.”
Write-offs are rising, NPL ratios are falling, and absolute bad loan stocks are contracting—but largely through accounting clean-up mechanisms rather than a full revival in underlying credit health.
The critical question going forward is not whether asset quality is improving in headline terms—it is—but whether the improvement reflects genuine recovery in borrower capacity or simply the mechanical clearing of impaired assets from bank balance sheets.
Source:
www.graphic.com.gh