Stanchart records Shs116b profit as loan defaults fall

Kampala. A combination of reduced provisions for bad debts and rising income led Uganda’s second largest bank, Standard Chartered Bank. to post a 300 per cent growth in profitability. In financial statements released yesterday, Standard Chartered Bank Uganda revealed after tax profit had jumped from Shs28b at the end of 2015 to Shs112b in 2016.
According to Mr Albert Saltson, the chief executive officer (CEO), the bank adopted several initiatives that led them to have a better balance sheet.
“We undertook some restructuring with the view of optimising efficiencies and getting the best value from our stakeholders. We made substantial progress in reducing risk-weighted assets in our liquidation portfolio,” he said in a statement issued by the bank.

Return to profitability
The restructuring and return to improved profitability were done by the previous CEO, Mr Herman Kasekende, who at the start of March 2017 was moved to Standard Chartered Bank Zambia as CEO. He had been CEO of the Uganda affiliate for the last four years.
Significantly, the bank was able to reduce its expenses on provisioning for debts that were going bad. Banks are required to make provisions from their income if debts are going bad in order to avoid placing depositors at risk. Standard Chartered Bank saw its provisions fall 46 percent to Shs67b in 2016 from Shs116.6b. This reduced the expenses the bank incurred during 2016.
The income levels of the bank were also boosted by foreign exchange income, loans to the private sector, government securities and what the bank classified as expenses.
Other income grew to Shs10b from a paltry Shs44m in 2015. The trade from the global banking segment saw foreign exchange income rise by 35 per cent to Shs65b, whereas investment in government securities saw income rise by 18.5 per cent to Shs91.8b. Even with reduced lending, the bank saw its income from loans and advances grow 10.3 per cent.

Cautious lending

Just like Stanbic and dfcu, Standard Chartered Bank exercised cautious lending in part due to high lending rates to the private sector, good rates on lending to government and exposure to defaulting clients.
The Standard Chartered loan book reduced 7 per cent to Shs1.2 trillion in part due to those factors.
The bank still has a high Non-Performing Loan portfolio. According to the financial results, NPLs as a percentage of total loans increased slightly to 8.9 per cent (Shs112b) from 8.6 per cent (Shs113) in 2015.
The industry average at the end of December 2016 was about 8 per cent.

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