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ABSTRACT
The study examines empirically the financial performance of leading commercial banks and the banking industry in Ghana over the period 1999-2006 based on their financial statements. On the basis of their deposits, loans, assets, shareholder equity, net profits, return on equity, return on deposits and return on assets, Barclays Bank Ghana (BBG) ranked the best performing bank followed by Ecobank Ghana (EBG,) Standard Chartered Bank (SCB) and Ghana Commercial Bank (GCB) respectively. After exploring some impact assessments, the study concludes that the bank with higher total deposits, loans, total assets or their growth rates does not always translate into better financial performance. The study further establishes that the government's Financial Sector Strategic Plan (FINSSP) of 2003 has failed to make significant impact on commercial banking in Ghana.
JEL Classification: M12.
Keywords: Ghana; FINSSP; Banks; Performance; Profitability; Financial Ratios.
1. INTRODUCTION
Banks are crucial to any economy. They are a means of enforcing the government's monetary policy and they serve as a key medium of payment especially for businesses through demand deposit or cheque accounts. The current business environment such as deregulation of interest rates and the increasing number of new banks (mainly foreign ones) have led to stiff inter-bank competition. This is further compounded by the entrance of several non-bank financial institutions that has broken the monopoly that banks had in the provision of financial services. It has therefore become very necessary for managers of banks to continuously evaluate the risks and returns involved in carrying out the business of banking.
The evaluation of bank performance is also of interest to bank shareholders who are directly affected by bank performance. Evaluation of past performance helps develop expectations concerning future performance. Regulators are also interested in appraising the performance of banks in order to ensure the safety and soundness of the banking system and to preserve confidence which is the mainstay of banking. An appraisal of the financial performance of banks can provide early warning signals of bank distress and can enable regulators take remedial action early enough to prevent the total collapse of a bank which has the effect of eroding public confidence in banking thereby affecting other banks.
With the adoption and implementation of the Economic Recovery Programme in 1983, Ghana...