Banks record Shs685b in non-performing loans

Friday May 22 2020

Low lending: Non-performing loans are a barrier

Low lending: Non-performing loans are a barrier to growth of private sector credit given that banks hold back on lending to sectors that they consider fragile. FILE PHOTO  

By Ashita Chopra

Commercial banks recorded about Shs685.7b in non-performing loans for the period ended December 31, 2019, according to details compiled from annual performance results.

This was a growth from Shs535.8b that the industry registered in the same period in 2018.
A loan is declared non-performing if a borrower defaults on payment for at least 90 days or three months.
Banks are required to highlight such loans as bad debts to inform shareholders and the public about the financial status of such a bank.

In the period under review, according to details Stanbic Bank, which is Uganda’s largest bank by assets, registered the biggest share of non-performing loans, posting Shs120b in 2019. The bank also registered the same amount in 2018.

However, the bank registered substantial growth in both assets and profits in the same period. Assets grew to Shs6.6 trillion from Shs5.4 trillion in 2018 while profits rose from Shs215b to Shs259b in the period.
Absa, which early this year completed a transition from Barclays in 12 markets across Africa, saw its non-performing loans increase to Shs109b from Shs91b.

In the same period, Absa registered a 22.5 per cent growth in assets from Shs2.8 trillion to Shs3.4 trillion while profits grew by 13 per cent from Shs69b to Shs78b.

Dfcu Bank, which inherited a large trove of bad loans from defunct Crane Bank, registered a slight growth in non-performing loans from Shs80.8b to Shs89b in the period while Centenary Bank, which has been expanding across Uganda in the last five years, registered a substantial growth from Shs39.8b in 2018 to Shs60.8b.


Orient Bank, which recorded a reduction in net losses to Shs1b from Shs5.5b in the period, registered a leap in non-performing loans from Shs14.8b in 2018 to Shs60b in 2019.

The above banks (five) shared Shs438.8b between them, which is more than half of what was registered in a sector with about 24 banks.

The banking sector is expected to register an increase in non-performing loans for the period ended December 2020 due to slowed economic growth that has resulted from shutdowns in a number of sectors to limit the spread of Covid-19.

According to the Central Bank, growth is expected to contract to 3.9 per cent from earlier projections of 6 per cent.

Data from the Central Bank indicates that in the period to March, private sector loans stock grew by 1.3 per cent with trade accounting for the largest share of credit extensions at 23.8 per cent.

Manufacturing, personal and household loans and building, mortgage, construction and real estate were the other sectors that took a large share of private sector credit.

During the period, DTB registered Shs46.6b in non-performing loans from Shs27b in 2018 while Housing Finance Bank posted Shs36.35b from Shs20.6b in 2018. Standard Chartered saw it non-performing loans stock slightly increase to Shs23b in 2019 from Shs22b.

United Bank for Africa, which in the period recovered from years of losses, registered the least amount of non-performing loans reducing its stock from 60.5m in 2018 to Shs24.7m in 2019.
Bank of India and Citi did not declare details of their non-performing loans in the period.

View from an expert

According to Mr Stephen Kaboyo, the Alpha Capital managing partner, the inching up of non-performing loans is a result of a general slowdown in business activity and an increase creates a barrier for further credit extension negatively impacts the broader economy.
“It is expected the non-performing loans ratios will get worse before they get better due to the impact of Covid-19,” he said.