UGANDA’S BANKING SECTOR RETURNS TO PROFITABILITY

By Faridah Kulabako

KAMPALA, April 30 — Uganda’s banking industry is slowly returning to profitability after almost four years of weak performances 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 had been making successive losses, and Stanbic, which posted a 22.1 per cent decline in net profit in 2013, and Dfcu Bank, have announced a growth in profits.

UDB’s audited financial statements for the year ended Dec 31, 2014 released this week indicate that the institution’s net profited jumped to 4.8 billion shillings (one US dollar = about 3,000 shillings) last year compared with sh 515 million 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 per cent in 2013 to 13.01 per cent last year. At 13.01 per cent, the bank offers the cheapest long-term development loans, compared with commercial banks, whose average lending rate is estimated at 22 per cent.

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 fatten a little bit compared with 2013.

Bank profitability is said to have picked up last year, with year-on-year net earnings increasing from sh 414 billion to about sh 487 billion between 2013 and 2014. This is; however, lower than the sh 554.8 billion industry net profit posted in 2012, at the peak of the high interest rates that saw banks swim into huge profits.

SOURCE: NEW VISION

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