Barclays Bank of Uganda Limited has reported a rebound in after-tax profit growth following a slight dip in 2016.
Net profits after tax grew 30.8% in 2017 to Shs72bn, audited financials released in the print press on Monday show. The rebound was driven by a “very strong revenue performance and cost efficiencies,” according to the results release.
Barclay’s total revenue increased by 11.9% to Shs304.4bn, driven by an 18.3% increase in interest income – which was 74% of revenues compared to 70.2% last year. An increase of Shs13.8bn in interest received from deposits with other banks and group companies was the biggest contributor to the growth in interest income. Interest earned on loans and advances to customers rose 5.3% to Shs131.5bn, while interest on investment securities increased by 15% to Shs62.5bn.
The bank’s non-interest revenue declined by 2.6% following a marginal growth in fees and commissions revenues and a fall in foreign exchange income. Income from fees and commissions grew by only 1.6% to Shs56.8bn, while foreign exchange income declined for the second straight year by 12.1%; in 2016 it was down by 20.9%.
Barclay’s expenses rose 8.4% from a year ago, a more restrained rate than 2016’s 16.9% growth, to come in at Shs217.6bn. The provision for loan impairements increased to Shs32.9bn, Shs6.6bn more than in 2016, while management fees were up 85.3% to Shs12.2bn. Interest costs increased to Shs36.9bn, 23.7% higher than in 2016. The bank paid Shs32.6bn in interest to depositors and Shs4.2bn as borrowing costs in 2017.
But the more interesting expense item was the decline in other operating expenses – which include employee benefits, infrastructure costs, and administrative and general costs. They fell 1.9% to Shs125.9bn versus an increase of 7.5% in 2016. According to the results release, Barclays costs were “contained as we continue to invest in enhancing customer channels and improving operational efficiency”.
Reducing costs by investing in and technology and driving many routine transactions to technological platforms – say paying school fees or withdrawing money using bank’s mobile phone apps and mobile money – and investing in information technology infrastructure to fight operational risk is now mandatory in any bank’s strategic plan. Stanbic has followed the script, bringing down its operating costs; other banks are doing so too.
Barclays spent Shs11bn in 2017 to improve its branch and distribution network; it renovated the branch at Luwum Street in Kampala and expanded its branch at Abayita Ababiri. It also spent money on improving its IT infrastructure, and added four ATM machines to bring the total to 73. This, probably accompanied by a lower headcount and the closure of some branches helped bring operational costs down.
The bank’s pre-tax profit was up by 21.6% to Shs86.8bn following a decline in total expenses compared to 2016. It’s income tax expense also fell by Shs1.5bn, contributing to the sizable growth in after-tax profitability.
In 2016 expenses rose faster than revenue as the bank increased its provision for bad debts by Shs14.3bn, leading to a decline of 0.5% in after-tax profits. Revenue rose 12.7% to Shs272bn while expenses increased to Shs200.6bn, 16.9% higher than in 2015.
An increase in cash and balances with the central bank and loans to customers drove the growth in assets to Shs2.4 trillion in 2017, which was 29.7% more than in 2016. Cash balances with the Bank of Uganda rose 82.2% to Shs620.7bn and loans to customers increased by 25.1% to Shs1 trillion. Liabilities increased to Shs2 trillion, growing by Shs484.3bn. Customers deposits grew by 20.8%, coming in at Shs1.6 trillion.