Improving sovereign outlook strengthens Ghanaian banks – Fitch

Ghana’s improving sovereign credit profile is strengthening the country’s banking sector, with banks benefiting from stabilising macroeconomic conditions and their significant exposure to government securities, Fitch Ratings has said.

The international ratings agency said the improvement in Ghana’s creditworthiness has contributed to stronger operating conditions for banks, following the recovery of the sector from losses associated with the country’s sovereign debt restructuring.

Fitch upgraded Ghana’s Long-Term Issuer Default Ratings (IDRs) to ‘B’ with a Positive Outlook from ‘B-’ with a Stable Outlook in May, citing a sharp reduction in government debt relative to Gross Domestic Product (GDP) and a significant increase in international reserves.

The Positive Outlook, it said, reflects expectations that the country will maintain fiscal discipline and continue building its external buffers.

According to Fitch, Ghana’s macroeconomic environment has also become more stable, supported by sharp declines in inflation and interest rates, exchange-rate stability and strong real GDP growth.

The agency further noted that the economic effects of the Iran conflict on Ghana have so far remained contained.

The improved sovereign position is particularly important for banks because of their substantial holdings of government securities, making their credit profiles closely linked to that of the state.

Capital buffers strengthen

Ghanaian banks have also rebuilt their capital positions following the sovereign debt restructuring, which began in December 2022.

Fitch attributed the recovery largely to exceptionally strong profitability during the period of high interest rates.

The banking sector’s total capital adequacy ratio stood at 20.4 percent at the end of June 2026, more than twice the regulatory minimum requirement of 10 percent.

Almost all banks had also exited regulatory forbearance by the end of 2025. The measures were introduced to cushion the banking sector following the sovereign default and debt restructuring, which affected banks’ balance sheets.

Asset quality has also improved, according to the ratings agency.

The sector’s impaired loans ratio declined to 16.1 percent at the end of the first half of 2026, from 23.1 percent during the corresponding period of 2025.

Fitch attributed the improvement to strong credit growth and improving economic conditions.

The agency expects the impaired loans ratio to decline further as banks write off bad loans to comply with a new prudential limit of 10 percent, which takes effect at the end of 2026.

However, Fitch cautioned that lower interest rates are beginning to affect banks’ profitability.

While profitability remains strong compared with regional peers, the agency said the sharp decline in interest rates would continue to weigh on earnings throughout 2026.

GT Bank, UBA upgraded

Against the backdrop of Ghana’s sovereign upgrade, Fitch also upgraded the Long-Term IDRs of Guaranty Trust Bank (Ghana) Ltd and United Bank for Africa Ghana Ltd to ‘B’ with a Positive Outlook from ‘B-’ with a Stable Outlook.

It also raised the banks’ operating environment scores, reflecting the improved assessment of Ghana’s sovereign risk.

Fitch said the upgrades underline the close relationship between the health of Ghana’s banking sector and the country’s overall creditworthiness, given banks’ sizeable investments in government securities.

The agency’s assessment suggests that continued fiscal discipline, macroeconomic stability and improvements in Ghana’s debt profile could further strengthen the operating environment for banks, although declining interest rates and the need to further reduce impaired loans will remain key challenges for the sector.