Five banks – Stanbic, Centenary, Standard Chartered, Absa, and Dfcu – made a whopping Shs 690bn in total net profits, making them the most profitable banks in the industry. Three banks – Stanbic, Centenary and Stanchart – had net profits above Shs 100bn each. Absa and Dfcu’s were above Shs 70bn.
Stanbic’s after-tax-profits topped Shs 259 billion for 2019, up from Shs 215 billion in 2018, cementing its position as the most profitable bank in the country. Its assets hit the Shs 6.6 trillion mark in 2019 from Shs 5.4 trillion in 2018 – almost double the bank that follows.
Patrick Mweheire, former Stanbic Uganda chief executive, described this as ‘great performance”. Stanbic commands a market share of 20.5 per cent.
Centenary bank announced a 45 per cent increase in after-tax profits to Shs 155.9 billion, making it the second most profitable bank in the country. The Catholic church-founded institution remains a bank to watch with its assets expanding by at least Shs 500 billion last year alone to Shs 3.6 trillion. It is soaring on almost all the parameters – lending, customer deposits, and money earned from things like fees and commission.
Standard Chartered, a bank that has focused much on a leaner branch network but wants to have all its customers on digital platforms, made Shs 124bn in net profit. It says in its report that at least 86 per cent of its customers are transacting online. Absa and Dfcu made Shs 78bn and Shs 73bn net profits respectively. For Absa, it was even intriguing.
The bank, which is reporting for the first time as Absa brand after it completed the transition from Barclays last November, also grew its assets to Shs 3.4 trillion
from Shs 2.8 trillion in 2018. This is a testimony that the transition period, which started in 2016 as Barclays PLC sold its interest in Barclays Africa, has not had any negative impact on the bank’s performance.
Top banks show strong growth like customer deposits, money earned on loans, and from lending to the government. Costs for many banks still grew which means it is still expensive to do business in the country.
In fact, Mweheire warned: “No sustainable business or industry can have its cost growth massively exceed revenue growth for an extended period.” He added, “Unfortunately, with a cost-to-income ratio of 72 per cent across the sector as opposed to a global average of 55 per cent, we have a lot of work to do on banking efficiency in Uganda.”
Yet as the five top banks trailblazed, it is also clear a lot of banks are struggling to get their footing into the industry. At least seven banks made losses – although there were movements where hitherto profit-making banks made losses while loss-making ones transitioned to profit.
For instance, KCB saw one of its worst performances after it turned in a Shs 13.5bn loss in 2019 from a Shs 9.6bn profit in 2018. The bank changed management in 2018.
Orient bank, Commercial Bank of Africa (CBA), and ABC bank also moved from profit to losses. Cairo International bank, Exim bank, and Tropical bank continue their loss- making streak although some like Exim cut on the loss.
Tropical bank’s case is special. The bank, which first opened in the country in 1973 as Libyan Arab Uganda Bank, is now below the required minimum capital by Shs 3.8bn, according to auditors KPMG.
Commercial banks are expected to have at least Shs 25bn as minimum reserve capital, money that is usually used to pay depositors in case they came calling. For Tropical, this has been eaten into by cumulative losses the bank has been making.
With the bank undercapitalized and unprofitable – it made a loss of Shs 23.9bn in 2019 from Shs 5.7bn in 2018 – it has auditors worried. KPMG, which looked at its books, said Tropical bank’s situation points to “significant doubt on Tropical Bank Limited’s ability to continue as a going concern.”
Simply put, there has to be a capital injection or Tropical will inevitably collapse. Yet there is a category of banks that have managed to steady the sheep. These are seeing their profits grow although not at the pace of the trailblazers. These are Equity bank, Bank of Baroda, UBA, NC Bank, Ecobank, GT bank, Bank of India, and Finance Trust.
NC Bank, which turned a profit of Shs 3bn in 2019 from a Shs 4.3bn loss in 2018, will be completing a merger with CBA bank by July. Last year, three banks – Opportunity bank, Brac, and Afriland – received licenses to operate as commercial banks.
Opportunity bank (Shs 2.5bn) and Brac (Shs 9bn) turned profits. However, this was less than what they made in 2018, a year before becoming commercial banks. Opportunity’s profits fell by at least a half while Brac’s dropped by a whopping Shs 8bn – an indictor the transition was expensive. We were unable to access Afriland accounts.
Can these numbers be maintained in 2020? It’s a wait-and-see answer but the industry is certain on one thing: 2020 will be a hard one. With businesses closed, banks told to restructure loans and the central bank widely expecting bad loans to grow, the industry is bracing for the worst.
Brac managing director Jimmy Onesmus Adiga has already raised the alarm on their part that they will be more affected than other institutions.
He said, “Our delivery method for financial services is mainly (over 90 per cent) through groups. Due to social distancing, the groups cannot meet to apply for new loans, repay old loans or save. We have had to suspend all loan repayments and new loan disbursements during the lockdown period.”
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