The commercial banking sector registered growth of Shs4.5 trillion

A Bank of Uganda report showed that the banking sector registered a growth of Shs4.57 trillion in the year to March 2024. This represents a 9.94 percent growth in total assets from Shs45.92 trillion in March 2023 to to Sh50.48 trillion. in March 2024.

The report shows that this growth was slightly above the Shs3.45 trillion (8.13 percent) recorded in the 12 months to March 2023. It further reveals that the deposit base grew by Shs2.19 trillion ( 6.84 percent) from Sh32.01 trillion to Sh34.20 trillion in the same period.

However the intermediate position decreased as shown by the lower growth in advances of Shs1.31 trillion or 6.79 percent between March 2023 and March 2024 compared to Shs1.97 trillion (11.38 percent) registered in the last 12 months. until March 2023,” the report notes, adding that the banking sector recorded a net profit after tax of Shs1.5 trillion for the year ended December 31, 2023, from Shs1. 2 trillion registered last year.

From a quarterly perspective, the report reveals, gross profit after tax for the first three months to March 31, 2024, stood at Shs413.16 billion compared to Shs48 billion for the same period last year the past. This shows a growth of 3.68 percent.

At a recent business forum organized by NTV Uganda, Ramathan Ggoobi, the permanent secretary of the Ministry of Finance who is also the Secretary of the Treasury Department (PSST), wondered why commercial banks still charge high interest rates on loans.

“How do you charge a lot of interest from your customers when they borrow money when the banking sector is still making a lot of profit?” PSST Ggoobi wondered verbally.

Meanwhile, the central bank disclosed that the stock of non-performing loans for the period ending March 2024 has decreased by Shs68.22 billion or 5.99% from March 2023.

Accordingly, the ratio of non-performing loans/total loans and advances improved marginally from 5.72 percent to 5.05 percent.

Exchange rate updates

In the Financial Year (FY) 2023/24, the Ugandan shilling was pegged to the US dollar. In the first 11 months to May 2024, the shilling depreciated by 0.8 percent, to an average rate of Shs3,781.4 per US dollar from an average of Shs3,752.5 per US dollar last year. In the first half of FY2023/24 alone, the losses sustained by the shilling were mainly driven by high corporate demand, with oil firms, telecommunications, and manufacturing firms amid ongoing cash outflows. more when monetary policy remains stable in Advanced Economies (AEs) and competitive markets.

However, devaluation pressures were exerted by the tight monetary policy that strengthened the shilling in the second half of the Financial Year. The shilling has also been supported by increased foreign exchange inflows through higher foreign exchange receipts, long-term outflows, and appropriate monetary policy actions. Over time, BoU bought dollars to raise $199.8 million. Additionally, $80 million was raised through the proposed purchase, bringing the total BoU action to $279.8 million.

Also notable in the report is private sector credit (PSC) which has declined in FY2023/2024 compared to the previous FY due to slower growth in economic activity as well as continued high credit ratios. PSC growth has slowed to 7.8 percent in the nine months to March 2024 compared to 10.0 percent seen in the previous Financial Year.

Shilling loans were the main contributor to PSC growth, which grew by an average of 9.6 percent, but lower than last year’s average growth of 12.0 percent.

The growth in foreign currency loans declined to 3.7 percent from a different growth of 4.7 percent in the previous Financial Year.