Dfcu Bank Limited increased after-tax profit by 25% to Shs46 billion in the year to December 2016 despite a tumultuous year for the banking sector, according to audited summary financials released on Tuesday.
Total income rose 15% to Shs257bn from Shs224bn in 2015, while total expenditure increased by 13% to Shs197bn versus Shs175 bn the previous year.
Dfcu took over Crane Bank in January, three months after it was placed under statutory management by Bank of Uganda. Crane Bank, the fourth largest bank by assets as at the end of 2015, had fallen below its minimum regulatory capital requirements and was insolvent when it was taken over by the central bank in October.
Crane Bank’s collapse was the highlight of a tough year when banks struggled with a deterioration in credit quality which in turn hurt profitability. Bank of Uganda data shows the ratio of nonperforming loans to total loans of the entire banking sector rose to 10.47% in 2016, the highest recorded NPL ratio in 15 years. The loan loss coverage ratio also rose to 60.35% – its highest level in six years – meaning banks were provisioning more for their bad loans.
The banking sector’s return on assets and return on equity ratios also fell to their lowest levels in 15 years; the ROA ratio dropped to 1.33% (versus 2.62% in 2015) while the ROE ratio came in at 8.33% (compared to 15.96% in 2015).
Dfcu’s provision for bad loans rose 49% to Shs17 bn in 2016 from Shs11.7bn the previous year. Nonperforming loans however declined by 18% to Shs58bn from Shs71 bn in 2015. On the other hand, loans and advances to customers increased by 4.5% to Shs842bn – a conservative increase, given that they rose 18.5% in 2015.
This means the bank’s NPL ratio declined to 7% in 2016 from 9% in 2015. Bad debts written off also declined to Shs5 bn from Shs12 bn in 2015.
Total assets rose 6.5% to Shs1,727bn in 2016 versus Shs1,622bn the previous year. Total shareholder’s equity increased to Shs223 bn from Shs191.7bn in 2015, a 16% increment.
The bank’s core capital increased to Shs188bn in 2016 from Shs142bn the previous year. Total qualifying capital – the sum of core capital and supplemental capital – rose 24% to Shs261.7bn compared to Shs210.7bn in 2015.
With total risk-weighted assets increasing by 4.8% to come in at Shs1,059bn, the ratio of core capital to risk-weighted assets was 17.7% (versus 14% in 2015) while the ratio of total qualifying capital to risk-weighted assets was 24.7% (compared to 20.8% in 2015).
At the start of this year, commercial banks were required to set aside higher levels of capital to guard against possible shocks. The new minimum capital requirements had been in the works since 2013.
The minimum core capital requirement was raised to 10% of risk-weighted assets from 8%, while the total capital requirement rose to 12.5% of risk-weighted assets from 12%. Domestically systemically important banks are also required to set aside an additional capital buffer of 1-3.5%.
Meanwhile, dfcu Group – dfcu Bank’s parent corporation – reported a 28% increase in net profit for the year ended December 2016. Net profit was Shs45bn compared to Shs35bn in 2015, the results show.
Dfcu’s shares were trading at Shs760 on the Uganda Securities Exchange at the close of Tuesday, down 1.3% from their operating price this year.
The group’s total income increased by 15% to Shs257bn from Shs223bn, while total expenditure rose 13% to Shs198.6bn from Shs176bn in 2015.
Earnings per share rose to Shs91.16 compared to Shs70.98 the previous year, a 28% increase.
The company’s board of directors proposed a cash dividend of Shs25.19 per share to be paid on 31 July 2017. The company will hold its annual general meeting on 8 June 2017.
Shareholders’ equity increased to Shs249.7bn from Shs215bn, a 16% rise. Total assets also increased by 6% to Shs1,757.7bn.