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DFCU nets Shs 9.6bn profit


DFCU Bank shareholders are hopeful that 2016 will be good following the release of their company’s half year 2016 un-audited financial statements, which have indicated a Shs 9.6 billion increase in profit compared to the same period last year.

According to the financial performance for the first half of the year, net profit grew by 70.7% to top Shs 23.3bn compared to Shs13.7bn in the first six months of 2015. The improvement in net profit was attributed to a 20.1% rise in net income, which rose to Shs 83.8bn in the period under review.

However, the loan book registered a slight shrinkage of 1% to Shs759.4bn in 2016 compared to Shs 766.8bn in 2015 reflecting a slowdown in private sector credit observed in the first half of the year.

But liquid assets, which entail government securities, grew by 16.5% to Shs 746.2bn in 2016 from Shs766.8bn in the first half of 2015 and Shs731.4bn at the end of last year.

Juma Kisaame
Juma Kisaame

Its earnings per share grew by 70.7% year on year to Shs 46.9 from Shs 27.47 in June 2015. Return on Equity and return on assets stood at 9.78% way below the target of between 16% to 22%. Despite the improvement in performance and growth in profitability, the directors did not recommend payment of an interim dividend.

A source close to the bank said the good performance was hinged on significant investments made in information technology last year, which are beginning to bear fruit given the significantly lower cost to income ratio.

The improved results were also supported by the reduction of the government securities yield curve since a significant portion of the bank’s incomes are sourced from government securities (22.6% for the financial year 2015 according to the 2015 annual Report), according to an analyst.

The bank also made recoveries from previously written-off debt owing to the improvement in tea prices and volumes observed in the first half of this year.

Fred Muhumuza, a lecturer at the School of Economics and Management Sciences at Makerere University, did not want to read too much into the half year results but said the positive is that profit is positive although there is no information on the recoveries of former written off loans, which therefore may not be attributed to state of the economy over the last six months. “The economy still looks stressed to me,” he said.

Regardless of its improved performance thus making it a good buy, activity on the stock market remains bearish with the DFCU share price witnessing a downtrend since the beginning of the year as investors remained wary of banking stocks due to increased risks of higher non-performing loans in the sector.


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