Commercial banks’ profitability and portfolio management in Ghana

https://doi.org/10.35912/amor.v3i4.1420
Published: Mar 13, 2023

Abstract:

Purpose: The primary goal of the research was to assess the relationship between Ghanaian commercial banks' profitability and portfolio management.

Research methodology: All nine of the Ghana Stock Exchange (GSE)'s listed banks were included in the population of this descriptive study. All nine banks were sampled. This study only considered data from financial statements and bank reports covering the five-year period between 2016 and 2021.

Results: Results showed that asset investment has a positive effect on the financial performance of commercial banks in Ghana. Additionally, a positive effect of the loan portfolio on the commercial banks’ financial performance was found. It was finally discovered that asset investment affects the banks’ financial performance in a significantly positive way.

Limitations: The study was limited to nine banks listed on the GSE.

Contribution: It was concluded that when there is a good loan portfolio management policy, banks perform well and are profitable. Consequently, it is advised that top management and other stakeholders play a crucial role in achieving strategic goals by championing best practices in portfolio management and evaluating the sufficiency of effective portfolio management factors in an unbiased manner.

Keywords:
1. profitability
2. portfolio
3. commercial bank
4. financial performance
Authors:
1 . Nnenne Lekwauwa
BlueCrest University College, Kokomlemle, Accra, Ghana
2 . Anita Bans-Akutey
BlueCrest University College, Kokomlemle, Accra, Ghana
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How to Cite
Lekwauwa, N., & Bans-Akutey, A. (2023). Commercial banks’ profitability and portfolio management in Ghana. Annals of Management and Organization Research, 3(4), 245–257. https://doi.org/10.35912/amor.v3i4.1420
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Issue & Section
Vol. 3 No. 4 (2022): May
Articles
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References

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    Ankumah, T., & Bans-Akutey, A. (2021). Effect of Management Information System on the Productivity of Livestock Farming in Ghana: A Case Study of Selected Pig Farmers in Akuapem. Global Scientific Journal, 9(8), 607-614.

    Bans-Akutey, A., & Sowah, J. K. (2020). EXAMINING MANAGEMENT INFORMATION SYSTEMS IN HEALTHCARE ADMINISTRATION AT THE SUNYANI WEST DIS-TRICT OFGHANA. GSJ, 8(10), 489-499.

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    Chen, J.-S., Hou, J.-L., Wu, S.-M., & Chang-Chien, Y.-W. (2009). Constructing investment strategy portfolios by combination genetic algorithms. Expert Systems with Applications, 36(2), 3824-3828.

    Elonen, S., & Artto, K. A. (2003). Problems in managing internal development projects in multi-project environments. International journal of project management, 21(6), 395-402.

    Eric, N. (2016). The effect of loan portfolio quality on the performance of banks in Ghana.

    Firdaus, F., & Endri, E. (2020). Financial Statement Analysis: Evidence from Indonesian Bank BUKU IV. International Journal of Innovative Science and Research Technology, 5(4), 455-461.

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    Li, F., Zou, Y., & Lions, C. (2014). The Impact of credit risk management on profitability of commercial banks: A study of Europe. Unpublished MBA Thesis. Sweden: UMEA University.

    Markowitz, H. (1952). The utility of wealth. Journal of political economy, 60(2), 151-158.

    Mathur, I., & Marcelin, I. (2014). Unlocking credit Risk Management Post Financial Crisis: A Period of Monetary Easing: Emerald Group Publishing Limited.

    McMahon, R. (1995). Financial Management for Small Business (2nd edition ed.): CCH Australia.

    Merton, R. C. (1973). An intertemporal capital asset pricing model. Econometrica: Journal of the Econometric Society, 867-887.

    Monteiro, A., Cepêda, C., & Silva, A. (2022). EU Non-Financial Reporting Research. International Journal of Financial, Accounting, and Management, 4(3), 335-348.

    Moulin, S. (2016). modeling the financial management of a commercial bank: Lulu. com.

    Mukti, A. H. (2012). The Regional Autonomy and Credit Interest Loan: The Impact on Credit Growth of.

    Naab, R., & Bans-Akutey, A. (2021). Assessing the use of e-business strategies by SMEs in Ghana during the Covid-19 pandemic. Annals of Management and Organization Research, 2(3), 145-160.

    Nieman, G. (2014). Management of Small Businesses Context: A West African Approach. Nigeria. Abuja: Small and Medium Enterprises Development Agency of Nigeria.

    Nsambu, K. F. (2014). Factors affecting performance of commercial banks in Uganda a case for domestic commercial banks.

    Nuriyah, A., Endri, E., & Yasid, M. (2018). Micro, small-financial financing and its implications on the profitability of Sharia banks. DeReMa (Development Research of Management): Jurnal Manajemen, 13(2), 175-197.

    Obamuyi, T. M. (2013). DETERMINANTS OF BANKS’PROFITABILITY IN A DEVELOPING ECONOMY: EVIDENCE FROM NIGERIA. Organizations and Markets in Emerging Economies, 4(08), 97-111.

    Ogboi, C., & Unuafe, O. K. (2013). Impact of credit risk management and capital adequacy on the financial performance of commercial banks in Nigeria. Journal of emerging issues in economics, finance and banking, 2(3), 703-717.

    Okeke, U., Bans-Akutey, A., & Sassah-Ayensu, M. (2021). Benefits and risks associated with the use of blockchain and cryptocurrency as a form of payment in Ghana: A Case Study of Selected Bitcoin Trading Companies: IJICTM.

    Opoku, R. T., Angmor, P. L., & Boadi, L. A. (2016). Credit risk and bank profitability: Evidence from Ghana stock exchange. Journal for Studies in Management and Planning, 2(3), 89-96.

    Oyatoye, E. O., & Arilesere, W. O. (2012). A non-linear programming model for insurance company investment portfolio management in Nigeria. International Journal of Data Analysis Techniques and Strategies, 4(1), 83-100.

    Policy, B. S. (1998). Comptroller's Report of Operations-1997. Quarterly Journal, Vol, 17(1), 21.

    Purkayastha, S., Manolova, T. S., & Edelman, L. F. (2012). Diversification and performance in developed and emerging market contexts: A review of the literature. International Journal of Management Reviews, 14(1), 18-38.

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    Reilly, F. K., & Brown, K. C. (2011). Investment analysis and portfolio management: Cengage Learning.

    Rosen, D., & Saunders, D. (2016). Regress under stress: A simple least-squares method for integrating economic scenarios with risk simulations. Journal of Risk Management in Financial Institutions, 9(4), 391-412.

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    Swamy, V. (2015). Modelling bank asset quality and profitability: An empirical assessment. Retrieved from

    Thiong, O., & Kiama, P. (2018). Effect of loan portfolio growth on financial performance of commercial banks in Kenya.

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    Williams, E. (2020). Costly External Financing and Monetary Policy Transmission: Evidence from a Natural Experiment. Available at SSRN 3080665.

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  2. Albertazzi, U., Becker, B., & Boucinha, M. (2018). Portfolio rebalancing and the transmission of large-scale asset programmes: evidence from the euro area.
  3. Alhassan, A. L., Andoh, C., & Kyereboah-Coleman, A. (2014). Asset quality in a crisis period: An empirical examination of Ghanaian banks. Review of development finance, 4(1), 50-62.
  4. Alhassan, A. L., Owusu Brobbey, F., & Effah Asamoah, M. (2013). Does Asset Quality Persist on Bank Lending Behavior? Empirical Evidence from Ghana. Retrieved from
  5. Almumani, M. A. (2013). Impact of managerial factors on commercial bank profitability: Empirical evidence from Jordan. International Journal of Academic Research in Accounting, Finance and Management Sciences, 3(3), 298-310.
  6. Ankumah, T., & Bans-Akutey, A. (2021). Effect of Management Information System on the Productivity of Livestock Farming in Ghana: A Case Study of Selected Pig Farmers in Akuapem. Global Scientific Journal, 9(8), 607-614.
  7. Bans-Akutey, A., & Sowah, J. K. (2020). EXAMINING MANAGEMENT INFORMATION SYSTEMS IN HEALTHCARE ADMINISTRATION AT THE SUNYANI WEST DIS-TRICT OFGHANA. GSJ, 8(10), 489-499.
  8. Belete, B. (2018). The Effect of Credit Risk And Liquidity Risk on Financial Performance of Ethiopian Private Banks. st. mary's University.
  9. Bentum, W. (2012). The determinants of profitability of the commercial banks in Ghana during the Recent Years of Global Financial Crisis. Retrieved July, 15, 2014.
  10. Blomquist, T., & Müller, R. (2006). Practices, roles, and responsibilities of middle managers in program and portfolio management. Project Management Journal, 37(1), 52-66.
  11. Blumberg, B., Cooper, D., & Schindler, P. (2014). EBOOK: Business Research Methods: McGraw Hill.
  12. Chakrabarti, A., Singh, K., & Mahmood, I. (2007). Diversification and performance: evidence from East Asian firms. Strategic management journal, 28(2), 101-120.
  13. Chen, J.-S., Hou, J.-L., Wu, S.-M., & Chang-Chien, Y.-W. (2009). Constructing investment strategy portfolios by combination genetic algorithms. Expert Systems with Applications, 36(2), 3824-3828.
  14. Elonen, S., & Artto, K. A. (2003). Problems in managing internal development projects in multi-project environments. International journal of project management, 21(6), 395-402.
  15. Eric, N. (2016). The effect of loan portfolio quality on the performance of banks in Ghana.
  16. Firdaus, F., & Endri, E. (2020). Financial Statement Analysis: Evidence from Indonesian Bank BUKU IV. International Journal of Innovative Science and Research Technology, 5(4), 455-461.
  17. George, G. E., & Ouma, R. M. B. O. (2013). Adoption of technological innovations on organizational performance: Case of commercial banks in Kenya. Research Journal of finance and accounting, 4(3).
  18. Hamzah, R. S., Gozali, E. O. D., Annisa, M. L., & Pratiwi, C. N. (2022). The Role of Corporate Social Responsibility on the Performance of Indonesian Banking Corporation. International Journal of Financial, Accounting, and Management, 4(3), 365-377.
  19. Harelimana, J., & Gasheja, F. (2016). Analysis of loan portfolio management for financial profitability and sustainability of Umwalimu SACCO in Rwanda. British Journal of Economics, Management & Trade, 15(4), 1-16.
  20. Hoshi, T., & Kashyap, A. K. (2010). Will the US bank recapitalization succeed? Eight lessons from Japan. Journal of Financial Economics, 97(3), 398-417.
  21. Jorian, P. (2012). Risk management for alternative investments. Prepared for CAIA Supplementary Level II Book. https://merage. uci. edu/~ jorion/varseminar/Jorion-CAIA-Risk_Management. pdf.
  22. Kabajeh, M. A. M., Al Nu’aimat, S., & Dahmash, F. N. (2012). The relationship between the ROA, ROE and ROI ratios with Jordanian insurance public companies market share prices. International Journal of Humanities and Social Science, 2(11), 115-120.
  23. Kariuki, H. (2016). The Relationship Between Credit Risk Management Techniques and Loan Default Rates Among Commercial Banks in Kenya. University of Nairobi.
  24. Karki, K. P. (2019). A Study on Nonperforming Loan Management of Commercial Banks in Nepal.
  25. Khalid, A. (2012). The impact of asset quality on profitability of private banks in India: A case study of JK, ICICI, HDFC & YES Banks. Journal of African Macroeconomic Review, 2(1), 1-22.
  26. Lartey, V. C., Antwi, S., & Boadi, E. K. (2013). The relationship between liquidity and profitability of listed banks in Ghana. International Journal of Business and Social Science, 4(3), 48-56.
  27. Lesakova, L. (2007). Uses and limitations of profitability ratio analysis in managerial practice. Paper presented at the International Conference on Management, Enterprise and Benchmarking.
  28. Li, F., Zou, Y., & Lions, C. (2014). The Impact of credit risk management on profitability of commercial banks: A study of Europe. Unpublished MBA Thesis. Sweden: UMEA University.
  29. Markowitz, H. (1952). The utility of wealth. Journal of political economy, 60(2), 151-158.
  30. Mathur, I., & Marcelin, I. (2014). Unlocking credit Risk Management Post Financial Crisis: A Period of Monetary Easing: Emerald Group Publishing Limited.
  31. McMahon, R. (1995). Financial Management for Small Business (2nd edition ed.): CCH Australia.
  32. Merton, R. C. (1973). An intertemporal capital asset pricing model. Econometrica: Journal of the Econometric Society, 867-887.
  33. Monteiro, A., Cepêda, C., & Silva, A. (2022). EU Non-Financial Reporting Research. International Journal of Financial, Accounting, and Management, 4(3), 335-348.
  34. Moulin, S. (2016). modeling the financial management of a commercial bank: Lulu. com.
  35. Mukti, A. H. (2012). The Regional Autonomy and Credit Interest Loan: The Impact on Credit Growth of.
  36. Naab, R., & Bans-Akutey, A. (2021). Assessing the use of e-business strategies by SMEs in Ghana during the Covid-19 pandemic. Annals of Management and Organization Research, 2(3), 145-160.
  37. Nieman, G. (2014). Management of Small Businesses Context: A West African Approach. Nigeria. Abuja: Small and Medium Enterprises Development Agency of Nigeria.
  38. Nsambu, K. F. (2014). Factors affecting performance of commercial banks in Uganda a case for domestic commercial banks.
  39. Nuriyah, A., Endri, E., & Yasid, M. (2018). Micro, small-financial financing and its implications on the profitability of Sharia banks. DeReMa (Development Research of Management): Jurnal Manajemen, 13(2), 175-197.
  40. Obamuyi, T. M. (2013). DETERMINANTS OF BANKS’PROFITABILITY IN A DEVELOPING ECONOMY: EVIDENCE FROM NIGERIA. Organizations and Markets in Emerging Economies, 4(08), 97-111.
  41. Ogboi, C., & Unuafe, O. K. (2013). Impact of credit risk management and capital adequacy on the financial performance of commercial banks in Nigeria. Journal of emerging issues in economics, finance and banking, 2(3), 703-717.
  42. Okeke, U., Bans-Akutey, A., & Sassah-Ayensu, M. (2021). Benefits and risks associated with the use of blockchain and cryptocurrency as a form of payment in Ghana: A Case Study of Selected Bitcoin Trading Companies: IJICTM.
  43. Opoku, R. T., Angmor, P. L., & Boadi, L. A. (2016). Credit risk and bank profitability: Evidence from Ghana stock exchange. Journal for Studies in Management and Planning, 2(3), 89-96.
  44. Oyatoye, E. O., & Arilesere, W. O. (2012). A non-linear programming model for insurance company investment portfolio management in Nigeria. International Journal of Data Analysis Techniques and Strategies, 4(1), 83-100.
  45. Policy, B. S. (1998). Comptroller's Report of Operations-1997. Quarterly Journal, Vol, 17(1), 21.
  46. Purkayastha, S., Manolova, T. S., & Edelman, L. F. (2012). Diversification and performance in developed and emerging market contexts: A review of the literature. International Journal of Management Reviews, 14(1), 18-38.
  47. Rajeev, M., & Mahesh, H. (2010). Banking sector reforms and NPA: A study of Indian Commercial Banks: Institute for Social and Economic Change Bengaluru.
  48. Rasmussen, S. (2013). A model for the optimal risk management of (farm) firms. Retrieved from
  49. Reilly, F. K., & Brown, K. C. (2011). Investment analysis and portfolio management: Cengage Learning.
  50. Rosen, D., & Saunders, D. (2016). Regress under stress: A simple least-squares method for integrating economic scenarios with risk simulations. Journal of Risk Management in Financial Institutions, 9(4), 391-412.
  51. Ross, S., Westerfield, R., & Jordan, B. D. (2010). Fundamentals of Corporate Finance Standard Edition (9th Edition ed.): McGraw-Hill/Irwin.
  52. Sari, F. N., & Endri, E. (2019). Determinants of Return on Assets (ROA) On Conventional Banks Listed On Indonesian Stock Exchange (IDX) Period 2013–2017. IOSR Journal of Business and Management (IOSR-JBM), 21(4), 52-62.
  53. Swamy, V. (2015). Modelling bank asset quality and profitability: An empirical assessment. Retrieved from
  54. Thiong, O., & Kiama, P. (2018). Effect of loan portfolio growth on financial performance of commercial banks in Kenya.
  55. Tobin, S. A. (2016). Everyday piety Everyday Piety: Cornell University Press.
  56. Williams, E. (2020). Costly External Financing and Monetary Policy Transmission: Evidence from a Natural Experiment. Available at SSRN 3080665.