But analysts caution it’s too early to celebrate
Uganda’s banking industry seems to be recovering from the hard economic times experienced in the previous year as commercial banks start to record a surge in profits amid drops in Non-Performing Loans (NPLs).
Available data from commercial banks that have announced their annual performance; including Stanbic, Dfcu and DTB, shows that they recorded double digit growth in net profits in 2016 , with big reductions in their NPLs.
Financial analysts remain cautious saying it is not yet time to conclude that the banking industry is recovering.
“We shall need to look at the performance of more banks in the coming weeks to get a clear picture of the industry,” says Salima Nakiboneka, a financial analyst at the South African-based firm, Stanlib.
She told The Independent in an interview that the big banks which have announced their performance could have recorded increase in profitability and reduced their NPLs while the smaller banks could, in contrast, have recorded low profitability and a surge in NPLs given the harsh economic environment experienced last year.
Uganda had 24 banks as at the end of Dec. 2016.
For instance, the country’s largest commercial bank, Stanbic which announced its annual performance on March 29 shows that it recorded a 27% growth in net profit to Shs191.15 billion last year, up from Shs150.76 billion in 2015 and Shs135.08 billion in 2014.
The bank recorded sizeable recovery in both its interest and non-interest income. The difference between 2016 performance to 2015 on the interest income account shows a jump of Shs65 billion or 21%, while the non-interest income rose by Shs56 billion or 27%.
The non-Interest Income account performance significant as it showed a recovery from a drop recorded in 2015 compared to 2014.
The bank’s net interest income was Shs376 billion in 2016 compared to Shs311 in 2015 and Shs280 billion in 2014. The net non-interest income was Shs267 billion, Shs211 billion, and Shs214 billion for the three years respectively.
A mix of factors including investment in higher yielding governments securities, higher yields from loans and advances, and good returns from investment of excess liquidity into the interbank market.
Dfcu Bank also recorded a 25% growth in net profit to Shs46.2 billion, up from Shs37 billion recorded in 2015 and Shs41.6 billion in 2014.
The figures, however, do not include the performance of Crane Bank which Dfcu acquired recently. Crane Bank had NPLs of Shs142 billion out of the total industry NPLs of Shs573bn in 2015.
Another bank, Diamond Trust Bank (DTB) recorded Shs21.57 billion in profits in 2016, up from Shs19.79 billion in 2015 and Shs23.7 billion in 2014. It also owes the increase in earnings from investments in government securities, fees and commissions, as well as interest on deposits and placements.
This indicates that the country’s commercial banks are for the second year in a row making the bulk of their profits from non-interest services rather than the traditional drivers; loans.
Overall, the country’s banking’s industry recorded a 13% growth in net profit from Shs541 billion in 2015 to Shs612 billion in 2016. In 2014 they made Shs487 billion.