The high cost of living exacerbated by high inflation, volatile global oil prices and depreciation of the shilling slowed Stanbic Bank customer deposits for the year ended December 31, 2011.
The bank’s customer deposits, according to results released yesterday slightly increased from Shs1.3 trillion in 2010 to Shs1.89 trillion in 2011.
However, the bank’s performance was hugely lifted by income from interest rates that saw the bank post about Shs249.8 billion in 2011 compared to Shs172.7 billion registered in 2010.
The bank also grew its loan and advances to customers during the year to Shs1.5 trillion up from Shs1.2 trillion over the period.
Lending rates rose in the second half of 2011 as Bank of Uganda walked a tight monetary policy stance that sought to curb the growth in inflation, which in August soared to 30.4 per cent.
Commercial banks last year raised interest rates to correspond with the Central Bank adjustments in its key lending rates - Central Bank Rate.
The increases in interest rates, however, affected both new and old loans, making individuals and businesses that were already financing loans pay more than they would have paid.
Interest rates, for instance went up from an average of 20 per cent in the first half of 2011 close to 30 per cent in the second half of the year.
Stanbic Bank managing director, Mr Philip Odera, however, said a significant proportion of loan growth was advanced in the first half of the year before lending skyrocketed to dampen credit access.
The bank’s net fees and commission income also increased from Shs73.1 billion to Shs94.2 billion over the period. As a result of strong growths in those areas, the institution’s profit after tax for the year ended December 31, 2011 grew by 68.8 per cent from Shs72.1 billion in 2010 to Shs121.7 billion.
Mr Odera, however, attributed the strong performance to prudent cost management and strong performance from businesses that the bank supports.
“There were a number of companies and businesses that we support that registered strong performances during the year and this in turn enabled us to register good performance,” Mr Odera said yesterday.
As a result of growth in profits, the bank announced a Shs50 billion total dividend to be paid to shareholders, pending approval at the upcoming AGM slated for May.
Most banks last year engaged in deposit mobilisation campaigns in a bid to increase customer deposits as the tough economic times trimmed deposits in commercial banks, leading to liquidity challenges.
Financial institutions including Bank of Africa, Centenary Bank, Standard Chartered, Housing Finance, KCB, Stanbic and United Bank of Africa among others ran deposit mobilisation campaigns.
Stanbic is the second bank after Dfcu to report profit growth, after it registered profit growth from Shs21.9 billion in 2010 to Shs31.5 billion in 2011.