Stanbic Bank earnings rise on robust trading gains

Largest Ugandan bank by assets reports 22% rise in yearly operating profits

Stanbic Bank Uganda reported its strongest annual profitability in three years, boosted by a continued rebound in interest income and a large rise in gains from trading securities.

The largest Ugandan bank by assets on Thursday reported a net income of Shs258.6bn for 2019, or Shs5 per share, up 20.2% year on year. In 2018, profit after tax rose 7.3%, higher than the previous year’s growth of 4.9%.

Trading was Stanbic’s outstanding performer, with income rising 34.3% year on year to Shs191.2bn, led by a 125.3% surge in marketable securities to Shs147.9bn. The strong growth in trading revenue undid two straight years of negative growth and ensured that the item was the biggest contributor to operating income growth.

Net interest income rebounded further, increasing by 20.9% to Shs448.6bn. This was in spite of a 7.2% growth in interest expenses compared to the 34.3% decline recorded in 2018. Interest income was up 19.8% to Shs484.4bn, faster than the previous year’s growth of 0.2%, driven by a 25.5% rise in interest earned on loans and advances to Shs398.6bn.

“We grew our deposits by 21% as more customers trusted us with their money, and our loans and advances grew by 14% by availing Shs344bn of new credit to key sectors of the economy such as manufacturing, agriculture and personal lending where we provided more than 40% of new lending,” said Patrick Mweheire, Stanbic’s outgoing chief executive.

Net fees and commission income rose 11.5% to Shs160.9bn, while operating income increased to Shs806.7bn, up 22% year on year. Mr Mweheire pointed out that Stanbic’s revenues were “well-diversified between lending and non-lending revenue.”

Stanbic continued investing in digitisation and technology in 2019, improving its “core banking system and several other peripheral systems such as internet banking and business online banking,” said Mr Mweheire in a statement released by the bank.

“As a result, over 85% of all the bank’s transactions are now executed digitally – branches are less than 15% from 40% less than 3 years ago. All of this digitisation has allowed us to put banking back into the hands of the customer wherever and whenever they want.”

These investments drove up operating expenses to Shs390bn, up by 14% from 2018. Management fees rose 21.6% to Shs24bn.

Profit before tax increased by 17.6% to Shs349bn, while Stanbic’s income tax expense for 2019 came in at Shs90.3bn.

Mr Mweheire said that he expects “more credit pressure and the rise of non-performing loans to increase from its pre-cycle number of 4.7%” as the country moves into the 2021 election season. But there seems to be “room to manoeuvre given where inflation and base rates are this time,” he added.