Stanbic Bank Uganda (SBU) has posted a 1.68 per cent drop in profit after tax in the first six months of this year, a period that saw most of its performance indicators post negative growth.

The bank, which is the largest by assets, branch network, loans and deposits in Uganda, on Monday said its profitability was negatively affected by shrinking credit demand caused by persistent high interest rates in the Uganda market and increased operating costs attributed to the rollout of a new platform.

Profit after tax as at the end of June 2013 stood at Ush57.32 billion ($22.09 million) compared to Ush58.3 billion ($23.5 million) posted at the end of June 2012.

Interest income, which mainly comprises interest earned from outstanding loans, dropped by 27.59 per cent to Ush137.89 billion ($53.1 million) as at June 2013 from Ush190.42 billion ($29.01 million) as at June 2012, reflecting the effect high lending rates had on its performance.

Phillip Odera, SBU’s managing director said the bank's performance was further affected by increased operating costs related to the deployment of its new platform. 

“The sharp drop in interest income was occasioned by relatively high lending rates dating back to last year. By end of June this year, Stanbic's prime rate stood at around 20 per cent compared to an industry average of 21 per cent which negatively impacted on credit demand,” said Mr Odera in a conference call.

The bank’s loan book had contracted by 7.75 per cent to Ush1.36 trillion ($525.9 million) as at the end of June this year from Ush1.47 trillion ($598.3 million) as at the end of June last year. 

Data from the Bank of Uganda shows that total commercial banks’ lending between January and June this year, grew by only 6.37 per cent to Ush7.67 trillion ($2.9 billion) from Ush7.21 trillion ($2.7 billion) compared to the similar period last year.

SBU’s operating expenses rose by 8.47 per cent to Ush76.05 billion ($29.3 million) from Ush70.11 billion ($28.3 million).   

“Our new operating platform went live in October which also fed into our running costs," said Mr Odera.