By Akech Oilvia
A report by Bank of Uganda has revealed that despite several businesses in Uganda grappling with the effects of the coronavirus pandemic, commercial banks recorded profits to a tune of 874 billion shillings by September 2020.
The Bank of Quarterly Financial Stability Review September 2020 that was released today indicated that the banking sector remained adequately capitalized to absorb emerging shocks with 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 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 potential implications for the 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 for the year ended.