Business
Ugandan Top Five Banks in Profits Jump
By A JOINT REPORT by David Malingha Doya and Bernard Busuulwa, The East African, 5 May 2008
May 7, 2008 - 1:16:51 PM

Stanbic, Standard Chartered, Crane, Baroda and Citi Bank posted combined profits before tax of Ush187 billion ($106 million) in 2007, up from Ush123 billion ($70 million) the year before, with income from interest increasing by almost 30 per cent.

Stanbic, Uganda’s largest bank in terms of deposits and branch network, recorded a 20 per cent rise in net interest income to Ush106.8 billion ($61million) last year, on the back of increased lending as well as asset leasing facilities.

Stanbic, which is listed on the Uganda Stock Exchange, came top of the pack with profits of Ush68 billion ($38.8 million) followed by Standard Chartered with Ush56 billion ($32 million) an increase of 51 per cent over 2006, the highest growth in as many years.

The current bank results come as the industry moves to attract new customers in a country with less than two million bank accounts — a strategy that appears to be working.

A substantial growth in business saw the banks receive 30 per cent more deposits in the year to record Ush2.5 trillion ($1.42 billion), while a similar increment was seen in loans and advances to customers, which totalled Ush1.2 trillion ($685 million).

Bank of Baroda registered a 65 per cent rise in lending to reach Ush68 billion ($38.8 million) while Stanbic recorded a 40 per cent rise in loans and advances at Ush477.6 billion ($272.9 million) in the same period.

Crane Bank saw its lending portfolio increase by 21.7 per cent to Ush144 billion ($82.2 million) in 2007; an aggressive strategy led to a 63 per cent growth in pre-tax profits of Ush25 billion ($14.2 million), the highest since its inception in 1995.

Orient Bank’s net profit before tax increased by 24 per cent to Ush8 billion ($4.5 million) in 2007 while Tropical Bank posted a Ush5 billion ($2.8 million) profit before tax. Loans and advances rose by 14 per cent to Ush43.5 billion ($24.8 million).

Stanbic Bank registered a 37 per cent increase in profit before tax of Ush68.8 billion ($39.3 million), up from Ush50.4 billion ($28.8 million) in 2006.

Last year marked the entry of Kenya Commercial Bank and Nigeria’s United Africa Bank into the Ugandan market as Bank of Uganda Governor Emmanuel Tumusiime-Mutebile moved to bring down interest rates by increasing competition. Kenya’s Equity Bank is also set to open operations soon through an acquisition.

The rising competition has led to large capital expenditures on branch expansion across the country, as well as acquisitions, such as Barclays’ reported $23 million buyout of Nile Bank.

By last week, Barclays was the only bank to feel the negative impact of its acquisition and aggressive branch expansion on its bottomline, posting a steep 80 per cent drop in profits.

Standard Chartered managing director Lamin Kemba Manjang attributed his bank’s performance to revenues realised from unsecured lending, foreign currency trading and extension of services to the small and medium enterprises sector.

He said, “In 2007, we focused on mobilising profits and this significantly contributed to our performance. Our investment in securities increased by over 100 per cent and our foreign exchange business continued to thrive.”

However, investment in government securities is likely to remain lower than in lending activities due to reduced interest rates on government securities in recent years. Government bonds currently carry an interest rate of 14 per cent, down from 18 per cent four years ago.

Emmanuel Kikoni, executive director of Uganda Bankers’ Association, attributed growth in the sector to overall growth in the economy.

“I think we have realised that the economy is growing and there is a lot of money around the country and that is why deposits have increased,” he said. “Attitudes are also good towards the new and old banks. The banking habits have also improved a lot in this country. People have more confidence in the banks and are no longer keeping their money under the mattress.”

Statistics from Bank of Uganda shows that in two years ending January 2008, total assets of all deposit-taking institutions grew by 60 per cent to Ush6.4 trillion ($3.65 billion) while deposits grew by 47 per cent to Ush4 trillion ($2.28 billion). Loans and advances to customers increased by 71 per cent to Ush2.5 trillion ($1.42 billion).