Republic Bank Ghana PLC is facing mounting pressure to turn its expanding balance sheet into stronger earnings after a sharp increase in borrowings coincided with a significant decline in profitability during the first nine months of 2026.
The bank’s group profit after tax fell by 24.19 per cent to GH¢153.42 million in the nine months ended September 2026, down from GH¢202.38 million recorded during the same period in 2025. At the same time, borrowings surged by 54.59 per cent to GH¢2.77 billion from GH¢1.79 billion, raising questions about the cost and sustainability of the bank’s funding strategy.
The contrasting movements in earnings and borrowings highlight a challenge confronting the lender. Although Republic Bank continues to expand its loan portfolio, attract deposits and strengthen its capital position, the financial benefits of that growth have yet to translate into improved profitability.
The bank’s latest results suggest that weaker interest income, rising operating expenses and increased credit impairment are eroding the returns generated from its growing asset base.
Borrowings Surge as Profitability Weakens
Republic Bank’s increased reliance on borrowed funds stands out among the key developments in its nine-month financial performance.
The bank received GH¢1.92 billion in new borrowings during the reporting period and repaid GH¢113.47 million, resulting in net financing cash inflows of approximately GH¢1.64 billion.
The additional funding has helped support the bank’s expanding balance sheet, with total group assets increasing by 19.07 per cent to GH¢11.71 billion.
However, the rise in borrowings comes at a time when the bank is generating less income from its core lending and investment activities.
Group interest income declined by 18.24 per cent to GH¢761.74 million from GH¢931.70 million a year earlier. Although interest expenses also fell by 27.55 per cent to GH¢281.36 million, the reduction was insufficient to prevent net interest income from falling.
Net interest income dropped by 11.59 per cent to GH¢480.38 million from GH¢543.36 million.
This development raises an important question about whether the bank can deploy its growing pool of borrowed funds into sufficiently profitable assets to compensate for funding costs, operating expenses and potential credit losses.
Borrowing can accelerate lending and asset expansion, but its contribution to shareholder returns ultimately depends on the margins earned from the assets it finances.
Loan Growth Fails to Deliver Higher Earnings
Republic Bank’s lending performance presents a striking contrast to its declining profits.
Net loans and advances to customers increased by 29.04 per cent to GH¢4.03 billion from GH¢3.12 billion, representing an increase of GH¢906.35 million.
The expansion demonstrates that the bank has continued extending financing to customers despite the difficult earnings environment.
Yet the increase in lending has not produced the expected improvement in interest income. This divergence may reflect changes in lending rates, the timing of new credit facilities entering the portfolio or lower returns from other interest-earning assets.
The decline in lending income is particularly important because interest-based activities remain central to the profitability of traditional commercial banks.
Republic Bank recorded a 27.39 per cent decline in group profit before tax to GH¢224.04 million. Earnings attributable to the bank’s controlling shareholders also fell to GH¢146.06 million from GH¢193.19 million.
At the separate bank level, profit after tax declined by 32.75 per cent to GH¢118.77 million.
Basic earnings per share consequently dropped to 13.94 pesewas from 20.73 pesewas, reflecting the pressure on returns available to shareholders.
Rising Operating Costs Deepen the Profit Squeeze
Weak interest income was not the only factor weighing on Republic Bank’s financial performance. Operating expenses also increased, further reducing the earnings generated from its activities.
Group personnel expenses rose by 9.15 per cent to GH¢252.71 million, while depreciation and amortisation increased by 11.34 per cent to GH¢47.35 million. Other operating expenses climbed by 3 per cent to GH¢155.61 million.
Meanwhile, total group operating income declined by 5.65 per cent to GH¢707.41 million.
The combination of lower income and higher expenses pushed the bank’s implied cost-to-income ratio to approximately 64.94 per cent, compared with about 56.85 per cent a year earlier.
This means the bank spent nearly 65 pesewas on operating costs for every cedi of operating income before impairment charges and tax.
Although fee-based activities provided some relief, they were insufficient to offset the broader pressure on earnings. Net fee and commission income increased by 26.01 per cent to GH¢148.14 million, while net trading income rose by 9.48 per cent to GH¢49.45 million.
The growth demonstrates the value of diversifying revenue sources beyond traditional lending. However, stronger cost management and improved interest margins remain important to restoring profitability.
Asset Quality Improves, but Credit Risks Remain
Republic Bank recorded an improvement in its reported non-performing loan ratio, which declined to 11.60 per cent from 16.49 per cent.
The reduction of 4.89 percentage points suggests an improvement in the proportion of loans classified as non-performing. Nevertheless, the ratio remains elevated, making the performance of newly issued loans an important consideration.
Net impairment losses on financial assets increased by 59.91 per cent to GH¢23.99 million from GH¢15 million.
The increase indicates that credit-related charges are moving in the wrong direction even as the reported non-performing loan ratio improves.
Sustaining the improvement in asset quality will depend on borrowers meeting their repayment obligations and the bank maintaining effective credit assessment and recovery processes as lending expands.
Liquidity and Capital Buffers Face New Tests
The bank’s funding strategy also coincides with a decline in its liquid resources.
Cash and cash equivalents fell by 14.16 per cent to GH¢3.45 billion, while its regulatory liquidity ratio declined to 104.86 per cent from 121.23 per cent.
The ratio remained above 100 per cent, and the bank reported no statutory liquidity breach during the period. However, the reduction highlights the growing importance of balancing lending expansion and investment activity against the need to maintain adequate liquidity.
Republic Bank’s operating cash flow recorded a net outflow of GH¢1.33 billion, while net investing cash outflow reached GH¢2.91 billion, driven mainly by purchases of investment securities.
Capital indicators, however, offered some reassurance. The capital adequacy ratio improved to 17.83 per cent from 16.75 per cent, while the leverage ratio rose to 7.21 per cent from 6.32 per cent. Group equity also increased by 15.61 per cent to GH¢1.45 billion.
The Final Quarter Will Test the Bank’s Strategy
Republic Bank enters the final quarter of 2026 with a larger loan portfolio, stronger capital ratios and improved fee income. However, the 55 per cent surge in borrowings alongside declining profits places greater importance on the returns generated from its expanded balance sheet.
The bank must demonstrate that its additional funding can support sustainable income growth without placing excessive pressure on liquidity, operating efficiency or asset quality.
A recovery in net interest income, tighter cost management and sustained improvements in loan performance will be critical to reversing the decline in earnings.
Ultimately, the challenge is not simply to grow lending or increase available funding. Republic Bank must ensure that the resources it deploys generate sufficient returns to reward shareholders while preserving the financial strength needed to support future expansion.
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