Uganda’s largest lender – Stanbic Uganda’s after-tax profit up 5%, here’s why…

Stanbic Uganda has announced a 5% growth in after-tax profit to $56m for the year ended 2017.

The growth in the profitability of the bank was largely driven by growth in none-interest income, lower operational costs, reduced credit risk.

None Interest Income expanded by 6.3% whereas operational costs declined by 3.5%.

Patrick Mweheire, the CEO Stanbic Uganda said that these low costs offset the lower returns on interest income.

“The banking sector suffered interest margin compressions because yields on government securities were collapsing and the reducing Central Bank Rate (CBR). Our lending to the private sector grew by 8.6%, higher than the industry average but income from the interest rate declined in line with the lower lending rates,” Mweheire said at the release of the Stanbic Bank results in Kampala.

In 2017, commercial banks including Stanbic Bank had to respond to the actions of Bank of Uganda (BoU) to reduce the benchmark lending rate.

According to Mweheire, in response to the CBR, they reduced the Prime Lending Rate from an average of 24% in 2016 to an average of 19% at the end of 2017.

Stanbic is the largest lender and holds the largest number of deposits in the Ugandan market. The bank deposits grew at a much higher pace – 18.4% – than the lending portfolio.

The 5% growth in lending, however, led to an expansion in the Stanbic asset base.

“Furthermore, given the relative size of our balance sheet with assets of Ushs5.4trillion or US$1.5 billion, the bank pro-actively supported the development of key sectors such as power  and  infrastructure by providing key financial instruments necessary to protect the Government of Uganda (“GoU”)’s execution of vital and sizeable infrastructure projects,” Mweheire noted.

Credit: Stanbic Uganda