Stanbic Bank Uganda has reported a fall in net profit for the first time in seven years as it strengthened provisions against losses from borrowers hit by the coronavirus, according to its full year results.
Uganda’s largest lender set aside Shs91.7bn to cover potential losses from doubtful and bad loans in 2020, more than twice the Shs43.5bn provisions made in 2019.
“Stanbic Bank’s performance has been commendable despite a difficult year riddled with challenges brought on by the pandemic,” the banks’ chief executive Anne Juuko said in a statement on a Wednesday. “… total asset quality deteriorated year on year due to the impact of [the] Covid-19 pandemic on client businesses.”
The bank on Wednesday reported a net profit of Shs243bn for 2020, 6 per cent lower from the previous year, the first decline since 2013.
Stanbic’s operating income also posted its slowest growth since 2017, rising 3 per cent to Shs636bn, a slower growth than 2019’s 22 per cent increase as its two revenue streams posted softer growth and shrunk.
Net trading income fell 7.2 per cent to Shs177.3bn — compared to an increase of 34.3 per cent the previous year — largely on a 45.9 per cent slump in foreign exchange income.
The bank’s net fees and commissions income also dropped to Shs157.2bn, 2.3 per cent lower than in 2019 and down from the 17.9 per cent growth registered that year. Fees and commissions are from various services provided by banks and include service charges on deposit accounts, ATM usage fees, transaction fees, letters of credit and loan fees, etc, and their decline reflects reduced business activity due to the coronavirus.
Net interest income rose to Shs490.4bn, increasing by 9.3 per cent which is weaker than the growth registered in the previous year. Growth in interest income slowed to 10.7 per cent, as the rise in interest earned from loans to customers moderated to 5.7 per cent, far below the 48.1 per cent growth recorded in 2019. Interest expenses rose 27.8 per cent, faster than in 2019, driven by an upsurge in the interest Stanbic paid on borrowed funds.
The bank’s nonperforming loans increased to Shs218.9bn from Shs183.4bn in 2019, while bad debts written off rose by Shs32.3bn to Shs48.4bn.
Despite the rise in nonperforming loans and loan-loss provisions, Stanbic’s core capital ratio — a key measure of a bank’s financial strength and ability to absorb unexpected losses — was unchanged at 15.8 per cent of risk-weighted assets.
The bank’s outstanding loans to customers at the end of the year rose 26.8 per cent, the fastest since 2011, coming in at Shs3.6 trillion.
Stanbic’s noninterest expenses in 2020 rose at a slower rate compared to the previous year, reflecting the effects of restrictions – such as a reduction in working hours – imposed to limit the spread of the coronavirus. Operating expenses were up 0.9 per cent to Shs393.6bn, while management fees increased by 2.9 per cent.
Pre-tax profit was Shs320.6bn, a decline of 8.1 per cent; in 2019, pre-tax profit rose 17.6 per cent to Shs349bn.
Stanbic Uganda Holdings Limited, the bank’s holding company, reported earnings per share of Shs4.72, down from Shs5.06. Its directors recommended a dividend of Shs1.95 per share, while the dividend in 2019 was Shs2.15 per share.
