At least 57 per cent of Uganda’s banking sector assets are held by five banks, according to Bank of Uganda.
The five banks, among which include Stanbic, Standard Chartered, Centenary, dfcu and Absa, are Domestic Systemically Important Banks, an indicator and methodology that Bank of Uganda employs to identify banks that are of high importance and value to the economy.
In details contained in the Bank of Uganda Annual Supervision Report for the period ended December 2020, all Domestic Systemically Important Banks were adequately capitalised and held sufficient liquidity buffers to withstand a 30-day run on the bank.
The report also indicates that the five banks returned a profitable year during 2020.
However, the five banks, during the period under reviewed, experienced a number of challenges, recording huge growth in loan write-offs and a reduction in profitability levels.
During the period ended December 2020, the banking sector set aside Shs364.7b to provision for loan losses and write-offs that substantially increased by Shs149.1b from Shs215.5b in the same period in 2019.
However, out of the Shs364.7b, the five banks, held the largest provisions, sharing between them Shs270.6b.
Stanbic, which is the largest bank by assets, set aside Shs91.8b for loan losses, which was a 110 per cent growth from
Shs43.5b in same period in 2019 while dfcu reported a 107 per cent growth in loan provisioning.
The bank’s impairment of financial assets rose by 400 per cent to reach Shs50b, which subsequently ate into its profitability, dropping by more than 67 per cent from Shs74b in December 2019 to Shs24b in 2020.
During the period, Absa set aside Shs60.7b from just Shs12.21b in 2019.However, the five banks also reported the largest profit levels with Stanbic, despite the growth in loan provisioning, posting the largest profit levels.
