Tuesday April 29 2014

More banks register decline in profits

Dancers entertain guests at a Crane Bank branch

Dancers entertain guests at a Crane Bank branch opening in Ibanda last year. The bank’s expansion drive has increased operating expenses, leading to a decrease in profits. FILE PHOTO  


More commercial banks have continued to register a decline in profits with others posting losses as the after effects of the turbulent economic challenges, suffered about three years ago, take a toll on the industry.

Due to lag effects characterised by weak demand and slow private sector investment, a number of borrowers are unable to repay their loans, resulting into huge impairment losses which have eaten into the banks’ profits.

So far, the biggest number of banks which have released their results posted either profit declines or losses with a few managing to sail through the lag effects to post growth in profits.

Crane Bank, Housing Finance and Tropical Bank are the latest to join the list of banks whose profits declined last year, with Crane’s net profit declining to Shs47.2 billion in 2013 from Shs80.3 billion that was posted the previous year.

Housing Finance’s profit on the other hand declined to Shs6.4 billion from Shs8.1 billion while profits of Tropical bank fell to Shs424.4 million from Shs1.6 billion in 2012.

The three join Stanbic, which reported a 22.1 per cent profit decline in net profit from Shs130.8 billion to Shs101.8 billion and ABC Capital, whose net profit declined from Shs1.1 billion to Shs892.8 million.
It should, however, be noted that banks including Bank of Africa, NC Bank and Imperial Bank posted losses over the period.

Bank of Africa made a Shs6.7 billion loss last year compared to a Shs9.9 billion profit posted in 2012.

Imperial bank’s loss rose to Shs1.9 billion from Shs1.7 billion in 2012 while NC Bank reduced its loss to Shs19 million last year from a Shs363.6 loss posted in 2012.

Bank of Africa’s Acting managing director, Mr Arthur Isiko, attributed the bank’s profit loss to high provisions for bad and doubtful debts which increased to Shs13 billion from Shs6.3 billion in 2012 and a fall in interest income due to a decline in lending rates.

Despite the lag effects and an increase in bad debts across the industry, a few banks including Centenary, Equity, KCB, Dfcu and Diamond Trust managed to sail through to post profit increases.

hard operating environment hurts banking industry

Commenting after the release of Stanbic results recently, Mr Arthur Nsiko, Head Research African Alliance Uganda, said the results posted by Stanbic was a pointer to the fact that the industry was yet to recover from the 2011 hard operating environment, adding that the trend was expected through the entire industry.

A decline in Crane Bank’s profit, on the other hand, was mainly blamed on an increase in operating expenses and investment in a subsidiary.

The bank’s operating expenses increased to Shs63.2 billion in 2013, from Shs49.3 billion in 2012, while investment in a subsidiary rose to Shs26.5 billion in 2013 from Shs50 million the previous year.
The bank opened a subsidiary in Rwanda.