Ugandan Commercial banks overcame the adverse effects of COVID-19 pandemic and recorded profits to a tune of 874bn by September 2020, the Bank of Uganda Quarterly Financial Stability Review for September 2020 has revealed.
The report that released on Monday November 30, 2020 indicates that the banking sector remained adequately capitalized to absorb emerging shocks.
The increase in capital was largely boosted by an improvement in aggregate profitability.
The report highlighted that on an annual basis, aggregate banking sector profitability increased for the 12 months ended September 2020.
“The net-after-tax profit for commercial banks and MDIs (Microfinance Deposit-taking Institutions) rose by 6.9 percent to Shs874.3 billion, and 1.5 percent to Shs13.8 billion, respectively, while credit institutions’ registered an aggregate loss of Shs5.5 billion, for the year ended September 2020,” the report reads in part.
The Central Bank revealed that the profitability was boosted by a decrease in provisions for bad debts.
However, Bank of Uganda warned that going forward, potential deterioration in asset quality could lead to an increase in specific provisions and erode the banking sector’s profits whilst reducing capital buffers.
Bank of Uganda has also expressed fears over the increased concentration and segmentation of the banking sector, saying the trend could affect competitiveness and efficiency of the sector going forward.
As at end of September 2020, the five largest banks accounted for 62.1 percent of total industry assets, and earned 75.2 percent of the industry profits.
