Leading commercial bank, Stanbic Uganda has Tuesday announced its 2017 half year financial performance posting a drop in profit by 11% (Ushs12 billion) amid a still subdued economic environment.
In its six month results, Stanbic registered a profit of Ush95 billion compared to Ush107 billion profit in June last year largely driven by significant easing in the bank’s lending rates, according to Patrick Mweheire the Stanbic CEO.
Stanbic Bank as part of its policy has had to lower its interest rate along with the Central Bank Rate by 5% over the last one year, to a current 18% the lowest in the market. This coupled with its huge operating costs has largely affected its profitability.
It should be noted that half year profitability across the banking industry dropped by 4% year on year from Ush 319 billion compared to an 18% growth at the same time last year.
On the brighter side however, Stanbic grew its customer deposits by Ush 388 billion (12%) to Ush 3.1 trillion while the loan book increased by Ush 140 billion (8%) to Ush 2 trillion, Mweheire said.
There was a 3% year on year drop in the bank’s operating costs from Ush 175 billion to Ush 1721 billion, largely driven digital marketing strategies undertaken through the period.
Whereas Mweheire admitted that 2016 ‘record’ performance was hard to replicate, he said this year’s half year results were a good outcome.
“At half year in 2016, we raised Ush 334 billion in total income. For 2017, it was hard to repeat this so we came down 6% year on year with Ush 314 billion in total revenue – Ush 178 billion net interest and Ush 136 billion in noninterest revenue,” Mweheire told journalists at Kampala Serena Hotel on Tuesday morning.
Noninterest revenue was impacted by a drop in trading revenues and the lack of volatility in forex exchange margins.
“But the good news – we kept the credit provisions basicly flat. What’s more gratifying is that we have not only kept the costs below inflation but reduced them. We have generated a profit after tax of Ush Ush 95 billion versus Ush 107 billion last year,” Mweheire said.
“If we can maintain what we made last year for a full year (Ush 191bn) it will be a good outcome. Being the largest bank to grow 30% and maintaining that quantum of revenue and profit isn’t easy,” he added.
Going forward, Stanbic Bank plans to increase its efficiency by investing more in digitization of its services and attracting stable deposits.
Mweheire says the banking sector as a whole must think of ways of getting private sector credit growth from the current 5% to double digit growth rate where it was in January 2016. Stanbic is growing faster (7%) than the industry whose average growth in private sector credit is at 5.7%.
In terms of the economy as a whole, Mweheire said that there are positive indicators of a pickup in GDP growth especially with an estimated USD 15 billion set to be invested in the oil sector between now and 2020.
He also said that the pressures of Non-Performing Loans have since lowered from a peak of 10% in 2016 to 2% now due to easing in monetary policy by Central Bank.
“We are optimistic that the economy will grow faster as individual and commercial borrowers take advantage of much lower interest rates,” Mweheire said.