Bank of Baroda Uganda bucked the downward trend in the commercial banking sector, reporting strong full year earnings on lower operating expenses and a boom in trading securities.
The bank said on Thursday it made a net profit of Shs83.4bn in 2020 ($23.4m). That compared with Shs45.3bn the previous year, when it also reported a 38.3 per cent fall in after-tax earnings.
Baroda’s performance is markedly different from those of its rivals, several of whom have reported hits to their earnings caused by the coronavirus pandemic. Absa Bank Uganda said its net income after tax declined 47.8 per cent in 2020, while Stanbic recorded a 6 per cent drop in net earnings , the first in seven years.
The subdued performance of Stanbic and Absa — which are the largest bank in the country, for the former, and among the largest in the latter case — was due to an increase in loan-loss provisions, which both banks said reflected the impact of the Covid-19 pandemic on their clients. The two banks also reported declines in fees and commissions income, which Absa attributed to “a drop in transactional activity, especially in the international trade, tourism, and hospitality sectors.”
Baroda seemingly did not have to worry much about its customers. The banks charge for probable loan losses fell for the second straight year, coming in at Shs2.5bn compared to Shs3.1bn in 2019. However, it reported a 15.2 per cent rise in non-performing loans even as bad debts written off declined by 99.4 per cent. Loan growth to customers was also the weakest in four years at 3.7 per cent.
The key driver of the bank’s performance was a 40 per cent decline in operating expenses which, when added to the 6.4 per cent fall in interest paid to depositors, led to total expenses decreasing by 23.3 per cent.
Interest income rose 8.1 per cent to Shs128bn, largely on a 45 per cent jump in interest earned from trading securities to Shs25.8bn. Interest earned on loans and advances to customers increased 2.4 per cent to Shs89.5bn — faster than 2019’s 1.2 per cent growth but still softer than in 2018. Net interest income was up 23.9 per cent, reflecting the 6.3 per cent fall in interest expenses.
Baroda reported a jump in foreign exchange income of 25.2 per cent, while fees and commissions grew by 4.8 per cent, slower than in 2019. Earnings from investment securities slumped 4.4 per […]