By Faridah Kulabako
UGANDA’S banking industry is slowly returning to profitability after almost four years of weak performance which resulted from the after-effects of the 2011 turbulent economic challenges.
So far all the banks which have released their audited financial statements, including Uganda Development Bank (UDB) which has been making losses, Stanbic which posted a 22.1% decline in net profit in 2013 and Dfcu Bank have posted profit growths.
UDB’s audited financial statements for the year ended December 31, 2014 released yesterday indicate that the institution’s net profited jumped to sh4.8b last year compared to sh515m posted in 2013.
The bank’s chief executive officer, Patricia Ojangole attributed the performance to rigorous loan monitoring, collections and recovery efforts undertaken by the bank that resulted in a drop in non-performing loans.
Aggressive loan recovery efforts saw the bank’s impairment loss on loans and advances decline from sh3.1b to sh2.7b during the period.
The bank also grew its loan book to sh108.8b from sh96.7b in 2013 due to a fall in interest rates from 14.11% in 2013 to 13.01% last year.
At 13.01%, the bank offers the cheapest long-term development loans, compared to commercial banks, whose average lending rate is estimated at 22%.
Although most banks are yet to release their results, available information indicates that a recovery in demand and growth in private sector credit saw banks’ balance sheets – loans and advances and deposits – fatten a little bit compared to 2013.
Bank profitability is said to have picked up last year, with year-on-year net after tax earnings increasing from sh414b to about sh487b between 2013 and 2014.
This is; however, lower than the sh554.8b industry net profit posted in 2012, at the helm of high interest rates that saw banks swim into huge profits.
It is also worth noting that last year, the volume of non-performing loans in the industry declined from sh465.8b to sh389.6b in the year to December 2014 while total bank loans increased by 14% from 6.2% in 2013, driven by real estate, trade and agriculture.
Stanbic Bank which released its results about two weeks ago also posted 32.5% growth in net profit from sh101.8b posted in 2013 to sh135b last year, supported by growth in net interest income, improved loan recovery and deposit growth, according to the bank’s chief executive officer Patrick Mweheirwe.
Stanbic’s loans and advances to customers grew from sh1.4 trillion in 2013 to sh1.6trillion last year while customer deposits increased from sh1.78trillion to sh2.13 trillion.
The impairment for credit losses on the other hand declined from sh44.9b posted in 2013 to sh37.3b last year, thanks to the aggressive loan recovery and credit quality efforts.
Dfcu Group on the other hand grew its profit by 19.5% to sh41.5b in 2014 supported by an increase in income from loans, government securities and forex trading.
Bank of Africa Uganda also returned to profitability after posting a profit of sh1.2b in 2014, from a loss of sh6.78b in 2013, thanks to the reduction in expenditure and non-performing loans (NPLs).
The Bank’s total expenditure reduced to sh67.5b in 2014 down from sh73.5b in 2013, while NPLs reduced to sh6.9b, down from a whooping sh20.1b in 2013. Additionally, the bank’s loans and advances to customers increased to sh241.9b, up from sh200.2b in 2013.
Also, total assets increased to sh497.6b up from sh428.1b in 2013. However, bad loans written off increased to sh11.2b, up from sh9.3b in 2013.
Claver B Serumaga the General Manager Business Development at BOA attributed the rebound to a number of factors.
“In 2014 the Bank concentrated on improving portfolio quality through better due diligence on credit and control and remedial action rather than aggressive portfolio growth, as such enjoyed reduction in the non performing book from 10% to 2.7%. Notably, there were also significant savings in interest cost with a year on year” Serumaga said.
“The fees and commissions also picked up with increase in transactions stemming from improved customer service and increasing customer numbers. The introduction on cutting age products such BMW also improved transaction volumes while managing the capital costs of brick and motor.
He noted that “the increase in operating income cushioned the Bank against operating costs arising from additional depreciation on capital expenditure on new projects in 2014.
On the Bank’s outlook for 2015, he said: “We expect a better year in 2015 riding on the solid foundation set in 2014 specifically rolling out an enhanced Mobile Banking Platform, introducing Visa Chip & Pin Cards and enhancing the value from our Business Centre.
Uganda’s banking sector back to profitability