Standard Chartered Bank Uganda, a cornerstone of the country’s financial landscape since 1912, faced an unprecedented setback in 2024, with net profits after tax plummeting by over 70% to Shs 19 billion from Shs80 billion in 2023.
This dramatic decline, reported in its financial statement for the year ending December 31, 2024 has sent shockwaves through Uganda’s banking sector, raising questions about the factors behind the collapse of earnings for one of the nation’s leading banks.
In the statement, Sanjay Rughani, CEO, Standard Chartered Bank Uganda, linked the decline to applicable tax payments to government.
“Costs grew by 6% year on year as we continue to make investments in our people and infrastructure. This resulted in a 3% drop in profit before impairment and tax. The Profit after tax reduced by 76% year on year due to a one-off tax payment recognised under applicable accounting and reporting standards,” he said.
The bank’s decision to exit its Wealth and Retail Banking (WRB) sector, announced in November 2024, further compounded these issues. As part of a global restructuring strategy, Standard Chartered aimed to focus on corporate and investment banking, divesting retail operations in Uganda, Botswana, and Zambia. This pivot, intended to streamline resources, likely disrupted retail revenue streams, contributing to the profit slump.
Economic headwinds in Uganda also weighed heavily. Rising domestic arrears, which climbed from Shs8 trillion in 2022 to over Shs10 trillion in 2023, strained businesses that rely on government contracts, many of which are bank clients.
Non-performing loans (NPLs), a persistent issue, remained a concern, with the bank’s NPL ratio at 2.96% in 2023. Provisions for bad debts, though reduced from Shs91.5 billion in 2022 to Shs32.5 billion in 2023, still reflected credit quality challenges that likely persisted into 2024, further squeezing profitability.
The bank’s strategic shift toward affluent clients and digital platforms, while forward-thinking, may have alienated segments of its retail customer base. Despite earlier successes—such as 86% of client interactions occurring outside branches in 2019—the transition to a leaner, corporate-focused model in Uganda’s competitive market proved challenging. With only 7% of Ugandans using commercial banks for savings, as per the 2024 National Population & Housing Census, the retail banking sector was already constrained, making the exit a risky but necessary gamble.
Industry observers, including economist Dr. Fred Muhumuza, have argued before that Uganda’s banking sector, with 22 banks chasing a limited bankable population, is overcrowded. This intense competition, coupled with delayed government payments to suppliers, created a tough operating environment.
Standard Chartered’s inconsistent performance over the past five years, despite its strong asset base of Shs3.65 trillion in 2023, underscores these systemic challenges.
As Standard Chartered navigates this transition, expected to conclude within 18 to 24 months, its focus on corporate banking signals a new chapter. However, the sharp profit drop in 2024 serves as a stark reminder of the complexities of operating in Uganda’s dynamic financial landscape, where economic, fiscal, and strategic factors can converge with devastating effect.
