None of the
top six banks posted losses. There was “just” a decline in profitability. They
still made money. Inside the boardrooms however it’s a whole different story.
The CEO’s have questions to answer. How to turn around a less than impressive
year?
The top six banks are Stanbic, Standard Chartered, Crane Bank, Centenary,
Barclays and Dfcu Bank respectively. The top three saw their profits dip by
22.11%, 26% and 41% respectively to Ugx101.8bn, Ugx97.6bn and Ugx47.2. The
other three, recorded a rise in profits by 3%, 4% and 5% respectively to
Ugx58bn, Ugx39.8bn and Ugx34.8bn. The top six banks account for at least 82% of
the entire banking sector net profits.
In 2012 profitability of all commercial
banks was Ugx586.5bn. This dropped by 21% to Ugx462bn in 2013. The top six
banks account for Ugx379bn – 82% - of
the entire commercial bank profits.
The trouble
for these banks was slowed operating income if compared to 2012. In 2012, the
top six’s’ income had grown above 15% however in 2013, none of the banks had
above 15% growth in income. In fact for Stanbic and Standard Chartered Bank,
income fell by more 12% and 14%. Overall the entire banking sector recorded a
19% decline in income to Ugx1.9trillion. It should be noted that the top six
contributed at least 81% of this income.
The less than impressive income by banks was
mostly as a result slowed growth of money they make off lending. In 2012,
interest income was surging with only Dfcu posting a rise of less than 11%. The
rest were above 18%. Despite Stanbic Bank and Standard Chartered being
diversified, their non-interest income also did not grow as well as it usually
does.
The banks
blame the economic environment as being unfavorable. Philip Odera, the CEO
Stanbic Bank says banks still had to deal with the effects of the 2011 rise in
interest rates, which led to an increase in loan defaults and provisions for
these bad debts. Even at Bank of Uganda they admit the less than impressive performance
of the sector was due cautious lending by banks and the poor performance of the
real estate sector.
Expenses
also grew and more notably were expenses to cover-up for the bad debts that
were written off. The provisions grew by 34.8% in 2013 down from 157.4% in
2012. The top six banks accounted for 60percent of these provisions, with
Standard Chartered Bank, Stanbic Bank and Crane Bank accounting for Ugx46.6bn,
Ugx50bn and Ugx44bn respectively.
In terms of
market share – calculated using deposits – the top six hold 63% in 2013. With
the exception of Centenary, Dfcu and Barclays, the rest of the top six lost a
market share. Stanbic’s share dropped by 3%, Standard Chartered also lost 1.2%
and Crane Bank also declined by 1.4%. The slip up by these banks means that
KCB, DTB, Ecobank, Imperial, Tropical, ABC, Housing Finance and Cairo
International Bank increased their market share by at least 0.5%. The top six
still control the largest chunk of banking assets, despite the 1% drop in their
market share to 64%.
The
implications of this less than impressive means that income tax contributions
from commercial banks also declined by more at least 13%.
Mark this is a very insightful read. Great staff.
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