BUSINESS: Navigating the Ugandan banking sector waters

In 2018, Uganda’s banking sector witnessed the biggest ever industry development when Parliament ordered for investigations into the closure of seven defunct banks by Bank of Uganda.

Led by Abdu Katuntu, the former Chairperson of the Committee of Commissions Statutory Authorities and State Enterprises (COSASE), the investigation kicked off following request by Parliament to the Auditor General John Muwanga.

The closed banks included Teefe Trust Bank closed in 1993 due to insolvency; the International Credit Bank closed on  September 18, 1998 due to poor liquidity and insolvency; the Greenland Bank closed on April 1, 1999  due to insolvency and violation of certain provisions of Financial Institutions Statute; The Cooperative Bank closed on May 19, 1999  due to continued poor performance and non-compliance with regulatory capital adequacy requirements; the National Bank of Commerce closed on September 27, 2012 due to undercapitalization; the Global Trust Bank closed on July 25, 2014 due to undercapitalization and corporate governance weaknesses; and the Crane Bank Limited, which was closed on  October 20, 2016, citing undercapitalization.

As the players in the industry kept tabs on the investigation and picked lessons on how to avoid falling prey to the woes of the closed banks, some undertook reforms and in the last two months a number of commercial banks have been releasing their 2018 financial results.

Most Profitable Banks

Stanbic Bank proved yet again to be a power house in the sector after amassing the highest profits, Shs215bn up from Shs200bn the Bank made in 2017. Stanbic was followed by fierce rival Centenary Bank, whose profits were recorded at Shs107.63bn, up from Shs100.27bn in 2017. Standard Chartered Bank came in third with profits of Shs96.08bn, up from Shs93.2 billion in 2017.

Bank of Baroda came in the fourth with profits of Shs73.48bn up from Shs49.4bn, while Barclays came in the fifth, posting profits of Shs68.84bn, a decline from Shs72bn the bank registered in 2017. According to the report, DFCU Bank, which emerged sixth, also registered decline in its profits.

Dfcu, which bought Crane Bank in 2017, registered profits of Shs61.7bn, this was almost half of what the Bank made in the same year after the financial results put their 2017 profits at Shs127.6bn. In seventh place was Citibank Uganda Ltd whose profits rose to Shs42bn up from Shs39.29bn.

Kenyan-based Equity Bank continued to cement its presence in Uganda’s banking sector and edging closer to the old players after posting profits of Shs35.29bn in 2018, up from Shs28.09bn in 2017. Commended for championing agent banking in Uganda, banking sources said Equity Bank is set to give the ‘old boys’ a run for their money in the sector.

Meanwhile, Government-owned Housing Finance Bank posted profits of Shs 20.9bn up from Shs19.98bn recorded in 2017 and was followed closely by Diamond Trust Bank, whose profit shot to Shs18.4bn from Shs15bn, and the Bank of Africa, another institution that recorded a decline in its profit of Shs15.14bn from Shs16.67bn recorded in 2017.

Another Kenyan bank, the Kenya Commercial Bank (KCB) also registered a dip in its profit from Shs10.25 billion registered in 2017 to Shs9.6bn.

Another public owned bank, the Finance Trust Bank registered growth in its profit to Shs5.84bn from Shs2.37bn, while Orient Bank saw a rise in its profits from Shs4.81bn in 2017 to Shs5.55bn.

Ecobank was among the biggest gainers in 2018 having recorded profit growth of Shs4.78bn from Shs1.54bn in 2017, while the ‘angel of profit growth’ also knocked on doors of Bank of India Uganda Ltd which made Shs4.1bn in profits, up from Shs3.55bn. The Commercial Bank of Africa registered a profit growth of 567 million, while figures indicate that the bank is recovering from loss of Shs1.32bn it registered in 2017.

In 2018, two banks made losses and these included Tropical Bank that made losses of Shs5.78bn, from Shs5.52bn loss the institution made in 2017. Tropical Bank is currently under Acting Managing Director, Dennis Kakeeto, who took over the ruins after Sameh M. Krekshi’s was unceremoniously removed in 2018 on directives of the Bank of Uganda, after an audit by the regulator indicated that Krekshi was overdrawing his account contrary to BoU regulations.

Cairo International Bank Ltd was another entity that made losses, Shs3.48bn from Shs1.14bn the bank lost in 2018.

Largest Banks by Assets

Another category that Stanbic Bank proved its muscle was its total assets hitting the Shs5.31trn mark although this was a decline from what the Shs5.40 trillion the Bank recorded in 2017. Standard Chartered Bank took the second spot with total assets of Shs2.92trn, from Shs2.81trn, while Dfcu Bank recorded another decline in its performance with its total assets declining to Shs2.88trn from Shs3.0trn in 2017.

Barclays Bank total assets grew further to Shs2.79trn from Shs2.47trn, while Bank of Baroda’s total assets also increased to Shs1.71trn, up from Shs1.53trn. Almost the same growth pattern was recorded by Diamond Trust Bank whose total assets rose to Shs1.6trn from Shs1.54trn.

Equity Bank registered further growth in its total assets Shs1.17Trn from Shs1.02Trn and it was the last bank in the trillion category with Citi Bank Uganda Ltd leading the billion category after its total assets reached Shs913.07bn although this was a decline from Shs926.29bn and was followed closely by Bank of Africa with a total assets growth of Shs789.9bn from Shs756.36bn and was followed by Housing Finance Bank with total assets of Shs776.88bn from Shs732.67bn.

The total assets of Orient Bank grew to Shs749.85bn from 680.9bn while KCB’s total assets declined to Shs686.14bn from Shs743bn in 2017, yet Ecobank posted total assets of Shs414.6Bn from Shs390.8Bn, and troubled Tropical Bank’s total assets grew slightly to Shs289.54bn from Shs283.1bn.

The total assets of Bank of India Uganda Ltd rose to Shs203.57bn from Shs168.9bn, Finance Trust Bank total assets also rose to Shs206.5bn from Shs178.78bn, while Commercial Bank of Africa total assets also increased to 200.4bn from 148.3bn and the same growth was picked by embattled Cairo International Bank Ltd with assets totaling to Shs124.76bn from Shs117.37bn.

Banks With Most Non-Performing Loans

The year 2018 saw banks struggle with Non- Performing Loans (NPL), with Dfcu Bank ‘topping’ this category with Shs80.82bn loans, from Shs96.67bn loans in 2017. Barclays Bank came in second with NPLs to a tune of Shs53.8bn from Shs106.78bn in 2017, which industry players say, is one of the reasons the Bank’s administration decided to reduce on loans dished out.

Centenary Bank grappled with NPLs to a tune of Shs62.23bn in 2017 and the institution has since worked tirelessly to reduce this figure by almost half to Shs39.8bn in 2018, while Diamond Trust Bank also reduced its NPLs to Shs27bn from Shs40bn, a trend that was adopted by Bank of Baroda whose NPLs dropped to Shs16.39bn from Shs35.5bn.

Standard Chartered Bank registered one of the highest declines in NPLs from Shs78.6bn to Shs22.2bn in 2017; the Housing Finance Bank’s NPLs rose from Ahs18.66bn to Shs20.66bn, while the Commercial Bank of Africa posted the highest NPLs growth of Shs20.4bn, up from Shs8.64bn in 2017.

Orient Bank’s NPLs also registered an increase to Shs13.2bn from Shs12.65bn, while the tremendous growth of Equity Bank was further witnessed in 2018 after the Bank cut down its NPLs to Shs12.63bn from Shs30.7bn in 2017.

The other banks that reduced their NPLs are Finance Trust Bank to Shs3.8bn from Shs4.74bn, Cairo International Bank Ltd to Shs1.78bn from Shs2.5bn yet Bank of India Uganda Ltd had no NPLs other than the Shs431.4m it had in 2017.

Conversely, the Bank of Africa NPLs grew to Shs10.3bn from Shs9.8bn and the same growth was reported by KCB whose NPLs grew to Shs8.3bn from Shs5.2bn.

Customer Deposits

Again, Stanbic commanded the lion share in customer deposits at Shs3.89trn, up from Shs3.62trn, while customer deposits at Centenary Bank hit ShsShs2.28trn up from Shs1.91trn in 2017. Dfcu Bank snatched the third spot after customer deposits reached Shs1.97trn from Shs1.98trn and another power house, Standard Chartered Bank came in fourth with customer deposits of Shs1.92trn, up from Shs1.90trn.

Customer deposits at Barclays Bank rose to Shs1.78 trillion from Shs1.68 trillion, while Diamond Trust Bank’s customer deposits declined to Shs1.14trn from Shs1.16trn and Bank of Baroda’s customer deposits rose to Shs1.3trn, up from Shs1.16trn.

Equity Bank maintained its impressive performance and is threatening to hit the trillion mark with its customer deposits reaching Shs875.5bn, up from Shs729.48bn, while Orient Bank’s customer deposits climbed to Shs618.0bn from Shs554.8bn. The Bank of Africa also registered slight growth in customer deposits of Shs568.86bn from Shs544.3bn, yet Citibank Uganda Ltd’s customer deposits declined to Shs536.13bn from Shs547.87bn.

Additionally, the customer deposits of KCB declined to Shs489.5bn from Shs532.88bn that were recorded in 2017, while Housing Finance Bank’s customer deposits increased to Shs451.3bn from Shs379.3bn in 2017. An almost similar growth was posted by Eco Bank whose customer deposits grew toShs288.3bn from Shs274.8bn in 2017, while Tropical Bank recorded growth in customer deposits to Shs182.6bn, up from Shs166.6bn.

Commercial Bank of Africa recorded growth in its customer deposits to Shs 134.02bn from Shs85.09bn in the previous year; Bank of India Uganda customer deposits rose to Shs125.45bn from Shs114.04bn, Finance Trust Bank customer deposits also increased to Shs124.3bn from Shs102.9bn, as well as Cairo International Bank Ltd whose Customer deposits rose to Shs80.5bn from Shs74.1bn.

Loans To Customers

Close scrutiny into loans advanced to customers shows that most of the banks increased loans advanced to its clients with Stanbic Bank yet again taking the lead, advancing Shs2.50trn, up from Shs2.13trn dished out in 2017. Barclays claimed the second spot with customer deposits of Shs1.78trn, up from Shs1.68trn; followed closely by Centenary Bank whose loans and advances to customers reached Shs1.53trn, up from Shs1.33trn.

The increasing trend continued with Dfcu Bank whose loans advanced to customers reached Shs1.39trn from Shs1.33trn, Standard Chartered Bank’s loans and advances were worth Shs 1.31trn from Shs1.22trn, while Bank of Baroda’s loans and advances amounted to Shs757.18bn from Shs616.57bn, and Equity Bank’s loans advanced to customers was Shs699.78bn, up from Shs495.95bn while loans advanced to customers at Diamond Trust Bank were Shs534.18bn, from Shs623bn.

Further, Housing Finance Bank loans and advances reached Shs 511.63bn from Shs 455.1bn; Bank of Africa loans and advances were Shs 344.14bn from Shs 320.37bn, while Orient Bank loans and advances aere Shs 334.1bn from Shs 310.78bn and Citibank Uganda Ltd loans and advances to its customers were Shs310.27bn, up from Shs261.28bn.

KCB advanced loans to its customers to a tune of Shs226.58bn from Shs238.69bn; Eco Bank loans advanced to customers decreased to Shs131.6bn from Shs145.8bn and an almost similar decrease was witnessed at Tropical Bank, whose loan advances to customers declined to Shs128.73bn from Shs139.14bn.

Meanwhile, Bank of India Uganda Ltd loan and advances rose to Shs127.3bn from Shs85.64bn; Finance Trust Bank’s loans and advances rose to Shs122.7bn from Shs116.4bn; Commercial Bank of Africa loans and advances rose to Shs85.85bn from Shs71.8bn and Cairo International Bank Ltd loans and advances rose to Shs54.8bn from Shs47.6bn.