The impact of covid-19 on banks profitability

Abstract

The purpose of this study was to examine the impact of the profitability of banks before and after covid-19. The study falls within the quantitative research paradigm and used secondary data. A survey research design was adopted in the study. A total of Five (5) banks were sampled for this study. Data were analyzed using statistical software program Statistical Package for the Social Sciences (SPSS) V. 23. The findings highlighted nuanced shifts in various financial indicators post-COVID-19, showcasing how the pandemic influenced the dynamics of bank performance. Notably, the study revealed a significant decrease in the Liquid Funds/Total Deposit Ratio, indicating a shift in banks' asset allocation away from liquid holdings. Moreover, the ROE exhibited a widened spectrum post-COVID-19, with a noticeable decline in average profitability. Before the pandemic, factors like liquid funds/total deposits, cost-to-income ratio, and net interest margin collectively accounted for substantial changes in ROE. In the aftermath of the pandemic, there was a marked shift in influential factors affecting ROE. Liquid funds/total deposits lost significance, while the cost-to-income ratio and net interest margin emerged as key determinants. One pivotal recommendation involves creating an environment that incentivizes financial institutions to bolster their resilience against potential future crises. Prioritizing strategic cost management stands as a crucial directive for banks in Ghana to navigate the challenges posed by economic uncertainties and crises like the COVID-19 pandemic.