Kampala — As the economy recovers from a slowdown, Stanbic Bank Uganda's half year net profit dropped to Shs95 billion from Shs107 billion in 2016. This is an 11 per cent drop from last year's performance.
Releasing interim results in Kampala on Tuesday, Mr Patrick Mweheire, the Stanbic Uganda chief executive officer, attributed the performance to a drop in interest rates and reduced credit uptake which reduced the bank's net income.
He said commercial banks average shilling lending rates dropped by 2 per cent from December 2016 to May 2017, wiping off Shs100 billion of interest income from the banking sector loan book which is Shs6 trillion combined.
This was due to the movements in the Central bank Rate which has reduced by 600 basis points to 10 per cent, the lowest point since its introduction in July 2015.
According to Mr Mweheire, the bank grew the off balance sheet exposure to an excess of Shs1 trillion in support of the trade and infrastructure development.
He said: "This provided a much needed buffer from a challenging economic environment characterised by low private sector credit growth and low aggregate demand."
He added: "We are optimistic of the second half as the downward revisions of the Central Bank Rate (CBR), four times in the first half of the year begin to stimulate borrowing and the much-needed private sector credit growth necessary to jump-start the economy."
Decrease in income
The bank also registered a 6 per cent decrease in total income to Shs314b in June 2017, down from Shs334b in June 2016.
However, loans advanced to customers increased to Shs2 trillion in June 2017, from Shs1.86 trillion in June 2016. Customer deposits also increased to Shs3.2 trillion in June 2017, from Shs2.6 trillion previously.
The bank's total assets also increased to Shs4.7 trillion from Shs4.5 trillion for the period under review.
Mr Mweheire noted that the economic environment has remained subdued, a thing that is going to affect performance of banking industry in 2017.
"We are optimistic that the economy will grow faster as individual and commercial borrowers take advantage of much lower interest rates. We have reduced our prime lending rate by 5 per cent over the last twelve months and will continue to support our customers by introducing new products and services that make a difference," he said.