Societe Generale Ghana Profit Slumps 47.69% as Falling Interest Income Erodes Earnings Despite Loan Growth

Societe Generale Ghana Plc posted a sharp decline in profitability in the first half of 2026, with profit after tax falling by 47.69% to GH¢128.21 million, as lower interest income, weaker trading revenue and rising operating costs outweighed solid growth in loans, deposits and cash generation.

The Ghana Stock Exchange-listed lender reported profit before tax of GH¢198.37 million, down 47.50% from GH¢377.86 million in the corresponding period last year, while earnings per share declined to GH¢0.36 from GH¢0.69.

The results underscore the growing pressure on banks operating in a lower interest-rate environment, where shrinking yields on loans and government securities are compressing margins despite expanding balance sheets.

Net Interest Income Takes Heavy Hit

The biggest drag on earnings came from interest income, which declined 27.82% to GH¢526.22 million from GH¢729.07 million. Although interest expenses fell 17.89% to GH¢93.36 million, the savings were insufficient to offset the steeper decline in income.

As a result, net interest income contracted 29.66% to GH¢432.87 million, reflecting the impact of lower market interest rates and reduced returns on interest-earning assets.

Fees Provide Some Relief

Non-interest income offered partial support during the period.

Net fee and commission income increased 27.29% to GH¢55.80 million, driven by a 10.13% increase in fee income and lower commission expenses, suggesting stronger activity in transaction banking, trade finance and account services.

However, the improvement was not enough to compensate for weaker core lending income.

Trading Revenue Weakens

Trading activities also softened significantly.

Net trading revenue declined 33.62% to GH¢43.35 million, while income from financial instruments measured at fair value dropped to GH¢6.11 million from GH¢10.60 million.

One bright spot was other operating income, which recovered to GH¢6.92 million from a GH¢70.71 million loss a year earlier, lifting total other operating income to GH¢56.37 million.

Despite that improvement, overall operating income fell 17.96% to GH¢545.04 million, while operating income after impairment declined 21.31% to GH¢554.42 million.

Higher Costs Squeeze Margins

Expenses continued to rise even as revenue weakened.

Total operating expenses increased 8.98% to GH¢356.05 million, driven by:

• Personnel expenses rising 7.90% to GH¢158.30 million.
• Depreciation and amortisation increasing 23.71% to GH¢75.18 million.
• Other operating expenses climbing 2.81% to GH¢122.57 million.

The combination of declining revenue and higher costs pushed the bank’s cost-to-income ratio sharply higher to 65.33%, compared with 49.17% a year earlier, indicating that the bank spent approximately 65 pesewas to generate every GH¢1 of operating income, up from about 49 pesewas previously.

Balance Sheet Continues to Expand

Despite weaker earnings, Societe Generale Ghana continued to grow its business.

Total assets increased 12.57% to GH¢10.97 billion, supported by:

• Loans and advances rising 21.80% to GH¢4.65 billion.
• Customer deposits increasing 20.17% to GH¢6.84 billion.
• Cash and cash equivalents growing 38.20% to GH¢3.63 billion.

Meanwhile, debt securities held at amortised cost declined 28.71% to GH¢1.62 billion, suggesting a strategic shift away from fixed-income investments toward customer lending and higher liquidity.

Loans now account for approximately 42.35% of total assets, up from 39.14% a year earlier.

Asset Quality Improves

Credit quality recorded a notable improvement during the period.

The bank’s non-performing loan (NPL) ratio declined to 13.85% from 17.90%, representing a 4.05 percentage-point improvement.

Although still elevated, the lower NPL ratio indicates improving loan recoveries and stronger asset quality, reducing future credit risk if the trend continues.

Capital Ratios Ease

Capital buffers weakened moderately as lending expanded.

• Capital Adequacy Ratio fell to 19.62% from 22.70%.
• Leverage Ratio declined to 13.69% from 15.57%.
• Liquidity Ratio eased to 107.97% from 116.99%.

Nevertheless, the bank remained compliant with all regulatory liquidity requirements and reported no sanctions from the Bank of Ghana.

Dividend Reduces Equity

Shareholders’ funds declined 5.00% to GH¢2.56 billion, mainly due to:

• A GH¢173.69 million dividend payable.
• A GH¢16.03 million transfer from retained earnings to the statutory reserve.

Retained earnings fell to GH¢1.09 billion, while the statutory reserve increased to GH¢560.49 million.

The bank intends to pay a GH¢0.24 per share dividend for the 2025 financial year in September 2026, subject to final approval by the Bank of Ghana.

Operating Cash Flow Surges

Despite weaker accounting profits, cash generation improved significantly.

Net cash generated from operating activities reached GH¢659.02 million, reversing a GH¢497.36 million outflow recorded during the first half of 2025.

The turnaround was largely driven by stronger customer deposit mobilisation and growth in other liabilities, highlighting the bank’s ability to generate liquidity despite pressure on earnings.

Outlook

Societe Generale Ghana’s first-half performance reflects the difficult operating environment facing Ghana’s banking industry following the sharp decline in domestic interest rates.

While the bank continues to expand lending, attract deposits, improve asset quality and strengthen operating cash flow, those gains have not yet translated into stronger profitability.

The key challenge in the second half of 2026 will be whether the larger loan book can generate sufficient interest and fee income to restore margins, improve operational efficiency and sustain earnings growth without reversing recent improvements in credit quality.