Share
Databank Group: Where to find investment opportunities in Ghana's banking sector
Traders say most banks in Ghana are attractively valued as most are trading below their book values and provides a good entry point for investors. As we examine the half-year numbers of the sector, Alex Boahen, Head of Research at Databank Group joins CNBC Africa to discuss how investors are responding to the banking sector earnings.
Mon, 17 Aug 2020 14:17:47 GMT
Disclaimer: The following content is generated automatically by a GPT AI and may not be accurate. To verify the details, please watch the video
AI Generated Summary
- Mixed results in Ghana's banking sector with some banks showing positive earnings while others experience declines
- Recovery in loan book growth and improved asset quality contribute to sector's performance
- Investors attracted to banking sector due to attractive valuations and growth potential, while Ghana positions itself for trade under AfCFTA
The banking sector in Ghana has been facing a mixed bag of results in the first half of the year, with some banks showing positive earnings while others experienced declines. Alex Boahen, Head of Research at Databank Group, highlighted that most banks saw double-digit growth in bottom line figures, driven by increased interest income and growth in loan books. However, the sector also faced challenges such as increased impairment charges due to the COVID-19 pandemic. Despite these challenges, Boahen noted that the overall performance of listed banks has been impressive compared to the previous year.
One of the key factors contributing to the mixed results in the sector is the recovery in loan book growth. Following a period of banking sector clean-up that led to a rise in non-performing loans, the sector has seen improvements in its asset quality, with the non-performing loan ratio decreasing to 15.7%. While some banks like Absa Bank Ghana and Ecobank Ghana reported profit declines, others such as Standard Chartered Bank and Societe Generale Ghana posted positive results.
Investors have shown interest in the banking sector due to the attractive valuations of banks trading below their book values. Boahen highlighted that the average price-to-book ratio for the industry is below one, making it an opportune time for investors to enter the market. In addition to the banking sector, sectors like telecom and oil marketing have also attracted investor attention in Ghana.
Aside from the banking sector, the inauguration of the Secretariat for the African Continental Free Trade Area (AfCFTA) in Ghana is seen as a significant development for the country's positioning in trade across Africa. While the immediate impact may not be noticeable, the presence of AfCFTA in Ghana signifies the country's importance within the investment landscape in Africa. Boahen mentioned that as Ghana gradually eases COVID-19 restrictions and business activities pick up, initiatives like the AfCFTA are expected to benefit the economy positively.
In conclusion, despite the challenges faced by the banking sector in Ghana, including COVID-19 related uncertainties, the sector has shown resilience and potential for growth. With attractive valuations and improving financial metrics, investors are presented with opportunities to capitalize on the sector's recovery and positioning within the broader African investment landscape.
SIGN UP FOR OUR NEWSLETTER
DAILY UPDATE
Get the best of CNBC Africa sent straight to your inbox with breaking business news, insights and updates from experts across the continent.
Get this delivered to your inbox, and more info about about our products and services. By signing up for newsletters, you are agreeing to our Terms of Use and Privacy Policy.