Govt debt shores up NCBA Bank profit position
NCBA, just like many banks, has found a safe haven in lending to government at the expense of the private sector. Photo / File
What you need to know:
- NCBA's income from government debt grew from Shs15.12b to Shs21.1b, translating into a 39.8 percent growth
An increase in income from treasury bills and bonds shored up NCBA Bank’s profits by 18.35 percent for the year that ended in December 2023.
The bank’s net profit for the year grew to Shs26.9b from Shs22.8b, supported by income from government debt, which surged from Shs15.12b to Shs21.1b, translating into a 39.8 percent growth.
Earnings from interest on loans and advances stood at Shs53.6b, which was an 8.5 percent increase from Shs49.4b, recorded in the same period in 2022.
NCBA financial results show that the bank holds a tremendous amount of money in government debt to a tune of Shs372.5b, which, but lower than the Shs389.5b it held in 2022. This is larger than the Shs252.95b disbursed in loans and advances, which, during the period, rose from Shs210.6b.
Banks have remained cautious on lending to the private sector preferring to invest in government debt, which is backed by guaranteed repayment.
Thus, NCBA’s investment strategy illustrates a cautious risk management measure, which many banks have deployed in the face of a dampened economic environment.
Mr Mark Muyobo, the NCBA chief executive officer, said in a corporate notice that the performance demonstrated that the bank had positioned itself for growth with total income growing by 16 percent, while profits before tax increased by 46 percent.
On the other hand, he said, loans and advances had grown by 20 percent, while customer deposits grew by 16 percent.
MoKash, a digital lending partnership with MTN, remains a strong income driver, which Mr Muyobo said has supported its agenda to enhance financial inclusion and ease access to short-term financing.
“Easing access to short-term credit to the unbanked and providing a savings platform to over 10 million of our clients. Our strategic partnership with MTN gives us the flexibility to make banking services more accessible to the under-banked population,” he said.
However, NCBA’s total expenses surged from Shs76.9b to Shs81.7b due to an increase in interest expense on deposits from Shs22.2b in 2022 to Shs28.9b in 2023.
