Total assets of the banking sector grew by 16.8 percent (Shs.5.5 trillion) from Shs.32.8 trillion in December 2019 to Shs.38.3 trillion in December 2020, a new report by Bank of Uganda (BoU) shows.
According to the BoU Annual Supervision Report for 2020, this growth rate was slightly higher than the 16.7 percent growth registered in the year ended December 2019.
The report attributes the growth to an increase in holdings of government securities which rose by 39.9 percent (Shs.2.9 trillion) to Shs.10.1 trillion, gross loans and advances by 12.3 percent (Shs.1.8 trillion) to Shs.16.3 trillion, and balances with banks abroad which increased by 22.6 percent (Shs.0.59 trillion) to Shs.3.19 trillion.
Furthermore, during 2020, banks increased the investment in liquid and less risky assets, that is, government securities and cash balances in comparison to loans and advances to the private sector.
“Hence, the holding of government securities as a proportion of total assets increased from 21.97 percent to 26.29 percent, while the ratio of gross loans and advances to total assets reduced from 44.04 percent to 42.51 percent over the year to December 2020,” the report states.
According to the report, the banking sector remained adequately capitalized, with capital buffers improving over the year to December 2020. The aggregate industry core and total capital adequacy ratios stood at 20.6 percent and 22.2 percent, an improvement compared to December 2019 of 20.1 percent and 21.8 percent respectively. The consolidated Leverage Ratio (the non-risk based capital requirement) increased from 10.7 percent to 11.0 percent between December 2019 and December 2020, and remained well above the prudential limit of 6 percent.