Uganda’s biggest banks record bumper profits amidst industry turmoil

Six banks adjust growth strategies, as Equity Bank dips into a loss territory

Kampala, Uganda | JULIUS BUSINGE | Uganda’s biggest banks recorded bumper profits in 2023 amidst industry turmoil that forced smaller banks to either divest their shares or voluntarily downgrade to credit institutions in response to the regulator’s revised capital requirements to remain operational.

Stanbic Uganda Holdings Ltd, Centenary Bank, ABSA, Standard Chartered Bank, and Housing Finance Bank recorded double-digit profit growth, earning more than expected billions for their shareholders in an environment that was also characterized by geopolitical tensions and high inflation.

However, the surge in inflation could have also been a blessing for bigger banks as it triggered the central bank to raise interest rates, allowing banks to charge borrowers more for loans.

SUHL, part of the Standard Bank Group – Africa’s premier bank by assets – recorded a 15.2% increase in profit after tax, reaching Shs412 billion primarily driven by loans and advances.

Listed on the Uganda Securities Exchange, SUHL oversees a diversified portfolio including Stanbic Bank, Stanbic Properties, SBG Securities, Stanbic Business Incubator, and FlyHub, collectively employing close to 2,000 individuals.

The indigenous bank with a strong foundations from the Catholic Church, Centenary Bank, recorded a 19% increase in profit after tax to Shs297 billion. The growth, according to the bank, was mainly boosted by interest on marketable securities besides fees and commissions as well as interest on loans and advances.

The bank’s assets grew from Shs5.7 trillion to Shs6.3 trillion as liabilities too surged by 0.4 trillion to Shs4.9 trillion during the period under review.

ABSA Uganda, a subsidiary of African Bank of South Africa, also recorded double-digit growth in profits, with net income increasing by 15.6% to Shs 146 billion. The growth, the lender said, is attributed to a 42% growth in transactional banking and trading income.

Standard Chartered Bank, for now, showed a significant rise in profits, doubling from Shs 40 billion to Shs 80 billion. Sanjay Rughani, CEO of Standard Chartered Bank, cited the bank’s robust growth to sustained income momentum across key business lines and significant reductions in credit impairments.

“The bank’s strong performance is further supported by the solid health of our franchise, which is underpinned by a proactive enterprise risk management framework,” Rughani said.

The Housing Finance Bank’s net profit increased by 11.3% from Shs58.5 billion to Shs65.1 billion because of an increase in interest income.

Citibank Uganda’s profit after tax, too, increased from Shs 52 billion in 2022 to Shs68 billion in 2023 – buoyed by interest on loans and advances among other income-generating activities.

Diamond Trust Bank profit after tax went up from Shs35 billion to Shs41 billion during the period under review, aided by an upward trend in interest income on deposits and placements, loans and advances, and on investment securities. However, the lender experienced a jump in expenses from Shs185 billion to Shs263 billion.

dfcu, Baroda, BoI, Tropical, sees decline in profits

On the other hand, dfcu recorded a slight decline in net profit from Shs29.4 billion to Shs28.7 billion during the same period under review, citing an increase in expenses. The bank’s assets declined from Shs3.2 trillion in 2022 to Shs3.1 trillion in 2023 as its liabilities reduced from Shs2.6 trillion to Shs2.5 trillion, according to the financial results.

However, the listed lender recorded a 1.5% increase in total interest income to Shs350 billion and a 12% increase in non-funded income to Shs97 billion during the same period under review.

Bank of Baroda experienced a 2.29% decline in profits to Shs 153 billion due to increased expenditures. Similarly, Bank of India reported a decrease in its profit after tax from Shs 10 billion to Shs 8 billion.

Tropical Bank net profit reduced from Shs7.4 billion to Shs5.8 billion in 2022 and 2023 respectively. However, it increased its assets from Shs281 billion in 2022 to Shs384 billion in 2023; liabilities increased from Shs206 billion in 2022 to Shs303 billion in 2023.

KCB too faced a slight reduction in profit after tax from Shs32 billion to Shs30 billion. However, its total expenses went up from Shs93 billion to Shs126 billion, citing increased interest expense on deposits and credit impairment expense for loans and advances. The bank had its assets grow from Shs1 trillion to Shs1.3 trillion.

Guaranty Trust Bank (GTB) net profit reduced from Shs5.7 billion to Shs3.6 billion. However, GTB recorded an increase in total income from Shs27 billion to Shs31 billion.

Bank of Africa reported an increase in total income from Shs147 billion to Shs158 billion but profit after tax declined from Shs29 billion to Shs25 billion during the period, citing increased expenses on deposits, interest expense on borrowings, and provision for bad and doubtful loans.

Ecobank and Cairo bank off the red territory as Equity slips in

Ecobank, meanwhile, recorded a net profit of Shs878 million in 2023, up from a loss of Shs4 billion the previous year. Interest on loans and advances supported its performance, increasing from Shs 13 billion to Shs21 billion.

Cairo Bank recorded a Shs1.6 billion profit after tax compared to a loss of Shs5.2 billion in the previous year, as interest from investment securities supported its performance. The lender’s total assets grew from Shs274 billion to Shs403 billion as liabilities surged from Shs192 billion to Shs238 billion during the same period.

Surprisingly, Equity Bank, which recorded profits for years since its entry into the Ugandan market in 2008, reportedly made a Shs 18.8 billion loss. This development comes at a time when five Equity Bank staff members were in March this year remanded to Luzira prison on charges of conspiracy to defraud the bank of Shs 62 billion through unsecured loans.

The suspects, Julius Musiime (Head of Agency Banking), Erina Nabisubi (Relationship Manager Telecom), Fred Semwogerere (Banker), Cresent Tumuhimbise Tibarwesereka (Relationship Officer), and Wycliff Asiimwe (Distribution and Marketing Consultant), are accused of being part of a scheme involving unauthorized debits and money laundering.

The prosecution alleges that between 2021 and 2024, the group obtained fraudulent loans by presenting unqualified individuals as legitimate borrowers. They are further accused of aiding in the concealment of the stolen funds.

Last year, Equity Bank profit reduced by 46.8% to Shs45.75 billion, down from Shs86 billion in 2021, according to the bank’s audited financial statements for the year ended December 3, 2022.

Financial experts, however, notes that the financial institutions are expected to generate more revenues this financial year because of a projected 6% growth in the economy and the ongoing investment in oil and gas.

Meanwhile, the central bank’s decision revise capital requirements requiring commercial banks to increase their capital by 500% from Shs 25 billion to Shs 150 billion, with a deadline set for June 30, 2024, has seen six banks new growth paths.

Finance Trust Bank (FTB), formally known as Uganda Women’s Finance Trust, has opted to sell an 80% stake to Access Bank PLC, a prominent Nigerian lender operating across more than 20 countries. The deal subjected to regulatory approvals from the BoU and the Central Bank of Nigeria, is expected to be concluded in the first half of 2024.

Djibouti’s Salaam African Bank (SAB) has since acquired Top Finance Bank Uganda, while Orient Bank found its acquirer in the regional lender, I&M Group.

In addition, BoU approved the application by three banks to downgrade their operations to credit institutions. The three commercial banks, according to BoU, are ABC Capital Bank (U) Limited, Guaranty Trust Bank (U) Limited, and Opportunity Bank Limited. The trio have a three-month period to transition starting from April 1, 2024, to June 30, 2024.

BoU Deputy Governor Michael Atingi-Ego said in March this year that the three-month transition period would allow the commercial banks to make adequate arrangements to phase out products and processes that require a Tier I license.

“This is intended to ensure a smooth service transition for their customers and to mitigate any disruption to financial sector stability,” he said.