The Banking industry reports that the not-so-friendly business environment has contributed to it’s failure to fully return to the post COVID-19 performance levels yet, despite improving results.
Stanbic Holdings Uganda Ltd (SUHL), which has announced a profit after tax of 235.5 billion shillings for the half year ended June 2024, says, however, that the challenges have lightly eased going into the second half.
The profit earned was higher than the 200.2 billion that was recorded for the corresponding period of 2023. Francis Karuhanga, SUHL’s Chief Executive Officer says despite the hard environment characterized by higher inflation, interest rates and foreign exchange, the performance was commendable.
“We have navigated the dynamic operating environment in the first half of the year, which was characterised by an uptick in inflation to 3.9 percent in June 2024, from 2.6 percent in December 2023, despite beingbelow the Central Bank’s forecast of 5 percent,” he said.
The industry also saw the Central Bank Rate(CBR) rise to 10.25 percent at the end of June 2024 from 9.5 percent in December 2023, resulting in a slight upward trend in lending rates. This, Karuhanga says, has an impact on the quality of assets in the industry and also the demand for credit as banks tend to adjust their lending interest rates with the movement of the CBR.
The interest rates oscillated between 16 and 21 percent for rime borrowers, which the banks says, was not very friendly, hence keeping some would-be borrowers away. “Private sector credit growth remained below 10 percent and stood at 6.6 percent, a signal that we are yet to return to pre-COVID levels of growth,” he said, adding that the customer loan book grew by 9.5 percent, with the bank focusing more on SME lending.
The bank also recorded a 4.9 percent increase in deposits to 6.6 trillion shillings, which accounted to a fifth of the market share. On the digital front the group reports that there FlexiPay platform and the agency banking channel moved a total of 14 trillion shillings in the six-month period.
The bank also boasts of its inclusivity policies that aim to ensure as many people as possible are catered for, like those small businesses and farmers who cannot compete for credit on the open market.
This is the reason why up to 100 billion shillings was invested in SMEs and women and youth enterprises over the period. Cathy Adengo, Head of Sustainability at the Bank adds that they are bent on ensuring that the farmers they support also embrace climate-friendly practices.
“Our role is to ensure that we are creating financing products and affordable packages that we support from the lowest level of agriculture, that look at mitigation and adaptation, all the way to large corporations that are in the value chain creating the ecosystems in agriculture.”
SHUL, the parent company of Stanbic Bank Uganda, the largest in the country by assets is also set to pay its shareholders a total of 140 billion shillings in dividends, following a decision by the group’s Board of Directors to approve the payment of 2.73 shillings per share for the 2023 period.
This is slightly higher than the 125 billion that was paid for the same period last year
The first half performance was boosted by the increase in net interest income to 362.2 billion, up from 345.7 billion shillings posted in the first half of 2023.
The results also show reduction on impairment charge for credit losses by more than half to 14.4 billion, while employee benefit expenses increased by about 14 expenses. Other expenses like operational expenses increased by 3 billion.
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