The five largest banks in Uganda, with assets worth more than Shs 1 trillion, recorded a profit for the year ended 2012.
However, Stanbic, Standard Chartered, Barclays, Crane and Centenary banks did not perform as well as they did the year before. Barclays had the most impressive growth in profit, with Shs 36bn made last year, 32 per cent more than the Shs 21bn for 2011.
Standard Charted had the highest amount of profit, though, at Shs 132bn, beating the industry's bellwether, Stanbic, which had Shs 130bn. Crane bank continued to cement its position as the most profitable indigenous bank, with a strong profit of Shs 80bn in 2012, up from Shs 66bn a year earlier, posting an increase of about 18%. Crane bank beat its main rival, Centenary bank, which had a profit of Shs 54bn, a 12 per cent jump.
In the published accounts, bank officials divulged little on what exactly contributed to the growth of their modest profit margins, although interest income appeared to be the main driver. Herman Kasekende, the Chief Executive Officer of Standard Chartered Uganda, attributed their growth to the outstanding performance in both consumer and wholesale banking.
"Consumer banking business continued to grow and recorded a solid financial performance amidst a challenging environment in 2012. The balance sheet grew by 20%," he said.
Prof John Ddumba-Ssentamu, the Centenary board chairman, said strong capitalisation played a role in the bank's performance.
"The robust growth was powered by the bank's robust capitalisation and healthy liquidity profile, which put it in a strong position to take advantage of rising business opportunities in the highly-competitive market," Ddumba-Ssentamu said.
Beyond the financial rhetoric, it was a tough year for the banks. For example, Barclays, which recorded a more than 100 per cent increase in profit between 2010 and 2011, this time round could only manage just over 30 per cent. Stanbic bank's profit moved by just seven per cent, one of its lowest in years. While Crane bank has in the past done a lot better than the 18 per cent profit increase it recorded last year.
Experts had earlier warned that 2012 would be rough. Bank of Uganda had earlier warned that many banks had lent out money in 2011, but the slow economic growth of 2012 pointed to future risks. Emmanuel Kikoni, the chairperson of the Uganda Bankers' Association, said the economy in 2012 was "not as bright" as in the previous years.
"The credit was not as high as in [early] 2011 and there is no way banks could have made huge profits," he told The Observer. Banks make more profit when they lend out money and it is paid up with interest.
Much of the loans went to the real estate sector, which faced huge credit defaults. Speaking at the release of Stanbic's results, Arthur Oginga, the Director Finance, said: "For the property market, I have to say it's a catch-22. It represented some losses we had. But we decided to take the loss, absorb it and continue".
But Dr Adam Mugume, Bank of Uganda's executive director for Research, thinks the performance was not so bad.
"I think the banks' profits were not bad. The banks that made losses are just new in the market and it's just a matter of time before they begin making profits," he said.