Stanbic Bank Uganda said on Thursday that its profit increased on a recovery in interest income, mainly driven by a rise in customer loans.
Uganda’s largest bank by assets reported an after-tax profit of Shs215.1bn in 2018, or Shs4.2 per share, up 7.3% from the previous year. Profit after tax in 2017 increased 4.9%, down from 26.8% the prior year following a slowdown in net interest income.
Stanbic blamed slower profit growth in 2017 on falling interest rates, which squeezed interest spreads. But the Bank of Uganda’s central bank rate, which determines the cost of new funds and lending rates of commercial banks, was last reduced in February 2018, before being raised to 10% in October.
The bank said its net interest income, the amount it makes on lending minus what it pays out on deposits, rose 5.2% to Shs370.9bn, largely due to growth in customer loans. That was a reversal from 2017, when net interest income fell by 6.3%. Net interest income as a share of preprovision revenue also increased to 56.1% from 55.4% the previous year.
Non-interest revenue increased slightly by 2%, slower than 2017’s growth of 6%. That was on the back of lower growth in net fees and commission income, 7.6% versus 14.5% in 2017.
Net operating income before loan-loss provisions rose 3.9% to Shs661.1bn compared to a decline of 1.2% a year earlier. Stanbic’s allowance for losses arising from its lending activity declined for the second straight year, falling 92.1% to Shs2.2bn. Total operating income after loan-loss provisions rose 8.5% to Shs658.8bn.
Costs increased 6.1% to Shs362.1bn, with the largest increases recorded for employee compensation expenses and other expenses. This marks a sharp reversal from 2017 when operating costs fell 3.2% on a decline in other operating expenses, which Stanbic attributed to operational efficiencies arising from investments in information technology and its digitisation strategy.
Pretax income rose 11.7% to Shs296.6bn. The bank paid Shs81.5bn in income taxes in 2018.
Stanbic Bank said it will pay a dividend of Shs1.9 per share to its shareholders on the Uganda Securities Exchange.