EXCLUSIVE: Ugandan Banks with Worst Debts Listed

In October 2016, this site Crane Bank had its management taken over by Bank of Uganda, story sending shockwaves across the banking industry.

While the Central Bank argued that the move was necessary to safeguard customers’ deposits, officials at the troubled financial institution said they needed more time to get a deep-pocket investor to consolidate gains from the expanded network.

However, it became clear that Crane Bank’s deposit base had been eroded by Non-Performing loans which stood at a staggering Shs122b.

This represented a growth of 635 percent of the bank’s NPLs, representing a market share of 29.7 percent.

Troubled banks

An investigation by ChimpReports indicates that several other top banks had worse NPLs which did not get due limelight and contextualisation.

For example, Diamond Trust Bank’s NPLs stood at Shs 5bn in 2013 and 2014. A year later, the NPLs increased to an overwhelming Shs69bn.

This means between 2014 and 2015, DTB had NPLs worth Shs 64bn, marking a 1259 percent increase in NPLs which represented a 10 percent of the market share.

Kenya Commercial Bank (Uganda Ltd) struggled with non-performing loans of Shs15bn as of December 2013. One year down the road, the NPLs were reduced to Shs 12.8bn. But in 2015, the NPLs doubled to 27.9bn – hence an increase of Shs 15bn NPLs (117 percent).

According to official statistics leaked from the Finance Ministry, Equity Bank had Shs 8bn in NPLs as of December 2013 before trimming the figure to 7.6 in 2014.

In 2015, the Kenyan bank’s NPLs were worth Shs18.5bn thus a Shs10bn increase in NPLs (141 percent growth).

DFCU Bank which boasts several branches across the country, registered NPLs valued at Shs 25bn in 2013 before the figure rose to Shs 47bn a year later and consequently Shs 71bn in 2015.

This meant that NPLs had grown to 23.6bn in a space of one year (50 percent growth), representing a market share of 10.3 percent.

Centenary Bank’s NPLs grew to Shs 27bn from Shs 24bn and Shs 18bn in the years 2015, 2014 and 2013 respectively. The growth of NPLs was at 13 percent as of December 2015, taking a market share of 4.0 percent.

The figures paint a grimmer picture of the banking sector, contrary to official statements that all is well.


Ugandan Banks' NPLs showed in the table above (Source: Finance Ministry records)

Ugandan Banks’ NPLs showed in the table above (Source: Finance Ministry records)


According to Bank of Uganda’s Annual Supervision Report December 2015, the industry NPL ratio for foreign currency loans and shilling loans rose from 3.2 percent and 4.9 percent respectively in December 2014, to 5.0 percent and 5.6 percent respectively at the end of December 2015.

The shilling non-performing loans grew by USh.40.3 billion and the foreign currency non-performing loans grew by USh.143.5 billion in the year to December 2015.

Sectoral analysis of NPLs shows that Trade and Commerce sector accounted for the largest share of NPLs with 20.2 percent at the end of December 2015.

The development points to the urgent need to lower commercial bank lending rates and increase investment in the Uganda Development Bank to provide cheaper loans to Ugandans especially in the agriculture.

For example, according to BoU supervision report, the agriculture sector “recorded the biggest increase in its total bad loans by USh.117.8 billion, majorly in foreign currency denominated NPLs.”

It added: “As such, the sector’s NPL ratio rose from 5.6 percent to 16.2 percent between December 2014 and December 2015.”

On the other hand, the manufacturing sector showed the most improvement in loan performance.

The sector’s NPLs dropped by USh.36.4 billion, improving its NPL ratio from 3.2 percent in December 2014 to 0.4 percent at the end of December 2015

According to the World Bank, the percent of non-performing loans in Uganda reflects the health of the banking system.

A higher percent of such loans shows that banks have difficulty collecting interest and principal on their credits.

That may lead to less profits for the banks in Uganda and, possibly, bank closures.


In a recent article, prominent Ugandan economist, Enock Twinoburyo said the prevailing situation of loss making banks raises the need for deeper vigilance and sends worrying signals.

He argues that the banking industry’s non-performing loans (NPLs) and bad loans write off also raise serious concerns on the sustainability trend.

“Indeed, partly due to NPLs and bad debts, Crane Bank recorded its first loss in ten years. Overall, NPLs to gross loans ratio is at 5.3 percent in 2015 more than twice in 2010 at 2.12 percent and remain higher than 4.13 percent in 2014. The same trend is also notable for NPLs to deposits ratios,” said Twinoburyo.

“Whereas it is true that deposits increased in 2015, NPLs did also increase sizeably leading to the return on asset (an indicator of how profitable a company is relative to its total assets) in 2015 reduced to 2.62 percent from 2.63 percent in 2014 and way much below to 4.03 percent in 201.”

He said return on equity (ROE) –profits to shareholders equity, reduced to 15.96 percent in 2015 which was largely lower than the previous years.

NSSF boss Richard Byarugaba recently observed that interest rates are determined by forces of demand and supply.

He explained that commercial banks act as sources of short term; medium and long term financing hence an increase of demand for money that encourages high interest rates.

A seasoned banker, Byarugaba said freeing pension scheme and creating a “robust development bank” would increase sources of funding hence reducing demand for money from commercial banks.


BoU said in its report that risks from bank lending Credit risk heightened during 2015 following the upward trend in commercial banks weighted lending rates from 20.4 percent in March 2015 to 24.3 percent in December 2015.

It said higher lending rates are likely to “increase the debt service-to- income ratio (DIR) repayment burden for households and enterprises which affected their ability to service existing debt.”

The Central Bank went ahead to posit that while the CBR was reduced in March 2016, the “stickiness of lending rates is likely to affect loan quality and continue to increase NPLs in the medium term. The rising trend of bank lending in foreign currency also poses challenges to banks.”

“The increase in the ratio of foreign currency loans to total loans could affect borrower’s ability to repay their loans if they earn in local currency. The ratio of foreign currency loans to total loans adjusted for depreciation effects has risen from 24 percent in December 2010 to 43.2 percent in December 2015.”


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