The Effect of Customer Deposit on the Performance of Banks in Ghana
Mobilization of savings from customers for lending to individual and institutions at a margin of interest is the main income generating activity of the bank. The effective generation of income through lending made possible as a result of adequate savings mobilized from customers enhances profitability and capital adequacy of the bank. The paper looks at the effects of customer deposit on the performance of banks with a case study of seven (7) years financial statements of the Barclays Bank of Ghana. The purpose of this study is to determine the effect of customer deposit on the financial performance of banks in Ghana. Using the descriptive research that involves describing, recording, analyzing and interpreting conditions as they exist, also known as statistical research, describes data and characteristics about the population or phenomenon being studied and a correlative analysis of various element of the financial statement of the bank. The study confirmed a strong and positive correlations between the customer deposits and; cash and balance at bank of Ghana, interest income, loans and advances, interest expense, and profit for the year ranging from 0.92 to 1.00, despite, a fairly negative correlation exist between the customer deposit and the current ratio that is the liquidity of the banks. The banks needs to mobilize savings to achieve the lending activities to earn their margin of income but needs to manage the savings mobilized
effectively to earn the appropriate margin to maintain a stable liquidity.