Ugandan banks' profits grow by 26.9% , BoU report shows

Uganda’s banking sector remained on growth track in the year ended December 2021, despite economic disruptions brought about by Covid-19 pandemic, Bank of Uganda (BoU)’s Annual Supervision Report 2021 shows.

The report provides specific information about the BoU’s supervisory activities during the year, the performance of Supervised Financial Institutions, and developments in the financial sector during the review period.

According to the report, commercial banks’ year on year profitability increased by 26.9% to Shs.1,073.9 billion as at end of 2021.

This growth in profitability is attributed to growth in credit and lending activity supported by the gradual recovery in economic activity.

The report indicates that the growth in credit during the year ended 2021 was the strongest, increasing at a rate of 8.8% to Shs17.7 trillion. Loans by Microfinance Deposit-Taking Institutions (MDIs) increased by 2.3% while those of Credit Institutions contracted by 58.4%.

Contrary, the ratio of non-performing loans was largely unchanged between 2020 and 2021 at 5.27% versus 5.26% respectively.

Furthermore, the report indicates that bank branches increased to 614 in 2021 compared to 566 in 2020, representing an increase by 46 branches.

Also, Automated Teller Machines (ATMs) operated by commercial banks increased by 46 to 886 in 2021 from 837 in 2020.

Commenting on the report, the deputy Governor, Michael Atingi-Ego attributed the banking sector’s resilience to the gradual recovery in economic activity, strong capital and liquidity buffers held by the supervised financial institutions1 (SFIs), and the effective policy measures implemented by the BoU.

He added that near term risk to financial stability remains elevated from the macro side given the general tightening of monetary policy, supply-side shocks and rising commodity prices.

These in combination, according to him, could have spillover adverse effects on Uganda’s financial system.

“However, the banking sector in Uganda remains resilient to these potential shocks given its enhanced loss absorbency capacity reflected in existing liquidity and capital.” the deputy governor noted.