Ugandan banks post record profit in 2018

Top six banks registered collective net profit of Shs 620bn

Kampala, Uganda | ISAAC KHISA | Uganda’s commercial banks surpassed investor expectations with 14 of the 15 banks that have published their financial performance results posting good profit margins in 2018, analysis by The Independent shows.

Banks like Stanbic, Centenary, Standard Chartered and Bank of Baroda zoomed ahead in their earnings, setting a new record in their profit growth amidst decline in interest rates.

The country’s interest rates oscillated between 18-22% throughout last year following the central bank’s decision to lower the central bank rate to 10% late 2017 – the lowest since 2011 when a monetary policy instrument known as Inflation Targeting Lite (IT-lite) was introduced to tame inflation.

Stanbic recorded a surprise increase in net profit from Shs 201bn in 2017 to Shs215bn in 2018, and so did Centenary and Standard Chartered Banks that recorded 6% and 3% growth in their net profits to Shs107bn and Shs96bn, respectively, during the period under review.

Similarly, Bank of Baroda recorded 48.73% jump in net profit to Shs 73bn in 2018 compared with Shs 49.36bn recorded in the previous year.

On the other hand, Barclays Bank and dfcu Bank recorded a 5% and 52% reduction in their profits to 68bn and 61.7bn, respectively, for 2018 compared with the previous year.

The top six commercial banks in the country recorded a combined Shs 620bn in net profit during the year, representing a whopping 88% of the Shs700bn net profit in a banking industry that boasts of 25 commercial banks.

This growth in the banks’ profits was due to increase in loan books and investment in government securities.

Interestingly, small banks, majority of which are simply making a decade in the market, also pulled a surprise performance to maintain their growth trend.

Equity Bank, for instance, registered a 26% growth in net profit to Shs 35.29bn driven by increase in loans and advances to customers and decrease in non-performing loans (NPL).

The lender’s loans advanced to customers increased from Shs 495.95bn to Shs 699.78bn, with the NPL reducing from as high as Shs 30.7bn to Shs 12.63bn during the same period under review.

In a similar manner, increased income earned from deposits and placements and investment in government securities helped Diamond Trust Bank to record a 22% growth in net profits to Shs 18.4bn.

The government owned Uganda Development Bank, which is charged with the mandate to loan long term businesses or projects, also made a surprise Shs1.1bn increase in net profit to record a Shs 9.4bn for the entire year. The bank’s asset base also increased from Shs 297.47bn to Shs 370.11bn during the period under review.

Finance Trust Bank, which graduated from a microfinance institution five years ago, saw its net profit more than double from Shs 2.36bn to Shs 5.85bn driven by loans and advances, interest on securities, fees and commissions.

The income from interest on loans and advances increased from Shs 33.29bn to Shs 36.38bn, interest on securities from Shs 1.29bn to Shs 2.07bn, and fees and commissions from Shs 17.93bn to Shs 19.15bn, respectively, during the same period under review.The bank’s balance sheet also registered growth of 16% to Shs 206.53bn.

“The bank will continue to focus on growing market share through customer acquisition and retention as well as targeting women as its primary customers. Leveraging technology will remain central to the growth of the bank,” said the lender’s managing director, Annet Nakawunde Mulindwa.

UBA saw its net profit more than triple from Shs 1bn to Shs4.9billion. The bank’s earning on loans and advances increased from Shs2.9bn to Shs 4.3bn while interest charged on government securities and foreign exchange earnings increased from Shs 12bn and 2.4bn to Shs 17.4bn and Shs 5.3bn during the same period under review.

However, the bank’s provision of bad debts increased from Shs 777.16million to Shs 1.13bn during the same period under review.

Equally, Opportunity Bank saw its net profits double from Shs 2.2bn to Shs 4.4bn whereas the Togolese based Ecobank posted an increase in net profit from Shs1.54bn to Shs4.78bn.

Nevertheless, Tropical Bank Uganda posted a loss for the third consecutive year. The lender saw its losses widen from Shs 5.52bn to Shs5.78bn as loans advanced to customer waned.