Cross-Border Banking and Financial Performance in Ghana: A Comparative Analysis of Local and Foreign Commercial Banks

The Financial Sector Adjustment Program has attracted several foreign banks to conduct business in Ghana. This has increased competition in the banking industry, hence impacting profitability. This paper examined cross-border banking by comparing the financial performance of local and foreign commercial banks in Ghana. The study used a total sample of 20 commercial banks, of which 10 are local and 10 foreign. The study sourced data from the audited financial statements of the banks through the Orbis database, which covered a five-year period from 2013 to 2017. The study employed financial ratios such as return on assets, return on equity, net interest margin, cost to income, cash deposit, loan to assets, non-performing loans, capital adequacy, and bank size to perform the analysis. The measurements and the analysis were figured, using Microsoft statistical office tools. The results show that the foreign commercial banks performed satisfactorily in return on asset (ROA), return on equity (ROE), cash deposit (CDR), cost to income ratio (CTI), capital adequacy ratio (CAR), and bank size (SIZE) except for loan to asset (LAR), non-performing loans (NPL), and net interest margin (NIM). On the other hand, the local commercial banks perform better in loan to asset ratio (LAR), non-performing loans (NPL), and net interest margin (NIM). The study concluded that, on average, the foreign banks are more profitable than their local counterparts. The study recommended that local banks should be allowed to hold less minimum capital requirement to enable them to have sufficient capital to invest in order to compete with their global competitors.