Stanbic Bank, Uganda’s largest bank, has released financials for 2016 showing a 27% increase in net profit, a solid performance in a challenging year for the banking sector.
Net profit for the year rose to Shs191bn compared to Shs151bn in 2015. Total income increased by 21% to Shs693bn, while total expenditure (excluding income tax) rose 18% to Shs439bn.
“Our accomplishments in 2016 were a direct result of pursuing the right strategy, operating a diversified business model, having the right people that worked together to fulfil our customer needs, and intense client focus in the right segments,” Stanbic chief executive, Patrick Mweheire said in a statement.
Revenue from the interest earned on assets climbed 21% to Shs424bn; the bank paid out Shs47bn as interest on deposits versus Shs39bn in 2015, an increase of 22%.
Net revenue from fees and commissions increased by 8% to Shs115bn, while net trading income – the revenue from foreign exchange trading and debt securities trading – rose 33% to Shs152bn.
The bank increased its assets to Shs4,589bn from Shs3,729bn in 2015, an increase of 23%. Stanbic is Uganda’s biggest bank by assets.
Loans and advances to customers grew by only 3% to Shs1,977bn versus an 18% rise in 2015. The slower growth of credit was “deliberate,” Mr Mweheire said, because “we did not want to increase our asset book in a high-interest environment.”
The modest increase in loans echoes that of Stanbic’s rival, dfcu Bank, which rose by 4.5% in 2016 compared to 18.5% in 2015.
Read More: Dfcu Bank profits up 25% in 2016
Although the demand for loans was “relatively robust” in 2016, loan approvals were “largely muted” according to Bank of Uganda’s Monetary Policy Report for February. This was due to tighter credit standards in banks.
Bank of Uganda statistics show that credit to the private sector grew by 5% in 2016 compared to 19% in 2015.
An increase in nonperforming loans heightened risk aversion among lenders, leading to tighter credit standards and a fall in approved loans. 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, according to Bank of Uganda data.
The loan loss coverage ratio of the banking sector also rose to 60.35% – its highest level in six years – meaning banks were provisioning more for bad loans.
Stanbic’s provision for bad loans increased by 27% to Shs37bn from Shs29bn in 2015.
The lender, however, saw its lending to other commercial banks surge during the year. Loans and advances to banks increased by 120% to Shs759bn versus Shs345bn in 2015.
Meanwhile, trading government securities rose 41% to Shs250bn while available-for-sale government securities increased by 26% to Shs641bn.
Total liabilities grew 22% to Shs3,874bn; the bulk of these are customer deposits which increased by 25% to Shs3,058bn. Deposit from banks however fell 20% to Shs294bn from Shs365bn.
Earnings per share rose to Shs3.73 compared to Shs2.95 the previous year, a 26% increase.
The company’s board of directors proposed a cash dividend of Shs1.172 per share to be paid by 01 June 2017. The company will hold its annual general meeting on 10 May 2017.
Shareholders’ equity increased to Shs715bn from Shs545bn, a 31% rise.