Dfcu Group, the holding company of Dfcu Bank, has reported a strong increase in profit for the first six months of the year on a more cautious approach to lending, which in turn saw loan-loss provisions reduce for the first time in four years.
Net profit increased to Shs29.3bn from Shs18.7bn in 2022, reversing last year’s 51.6 per cent decline, according to results released to the Uganda Securities Exchange. Profits before tax were also up 31 per cent year on year, compared to a fall of 48.7 per cent in 2022.
The rise in profit came largely through a significant drop in expected credit impairments at Dfcu Bank, which is responsible for about 90 per cent of the group’s earnings. Loan-loss provisions fell 33.3 per cent to Shs50bn, “driven by aggressive collections and recoveries,” according to Charles Mudiwa, the bank’s chief executive. Costs meanwhile rose 1.9 per cent to Shs164.9bn, reflecting the increase in operating expenses.
The bank also cut back on its lending activity for the third straight year, with net loans and advances down 16.2 per cent to Shs1.1 trillion. However, Mr Mudiwa said Dfcu registered an 11 per cent growth in borrowers through increased “lending to individuals and businesses across the country.”
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The banks’ precautionary lending is understandable in light of recent disclosures. Loans and securities in default increased by Shs133.7bn in the six months to the end of June, compared to Shs45.5bn in the second half of 2022, according to a regulatory disclosure. This pushed up the stock of non-performing loans to Shs189.6bn, up from Shs107.7bn at the end of 2022. It fared better with loan write-offs, at Shs50.8bn compared with Shs195.8bn in the second half of 2022.
The group’s net income rose 5.9 per cent year on year to Shs198.5bn, slightly higher than last year’s growth rate of 5.7 per cent, despite the decline in loans and advances; net interest income is the largest contributor to revenues (72.8 per cent in the first half of 2022). Non-interest income was up 25 per cent due to “the mass customer acquisition done over the period,” said Mr Mudiwa.
The company said it will not pay a dividend for the period.
