Stanbic Bank Uganda has yet again reduced its Prime Lending Rate, saying the move is in response to the prevailing market conditions. The bank has set the prime lending rate at 16 percent starting August 1, 2020, down from 16.5 percent set in May. The bank had previously set the rate at 17.5 percent at the beginning of the year.
In a notice to the public, the bank announced: “Stanbic Bank is reducing its Prime Lending Rate in line with prevailing market conditions. The rate has been reduced to 16.0 percent per annum for credit facilities in Uganda shillings.”
Stanbic says the new Prime lending rate will apply to both existing and new borrowing customers.
“As a bank, we have one of the lowest prime lending rates of all financial institutions in the country,” further said the bank.
Stanbic’s 16 percent is 2.84 percentage points below the 18.84 percent industry rate published by Bank of Uganda for May 2020.
16 percent is the lowest Prime Lending Rate in over a decade by the bank, that is Uganda’s largest lender, accounting for slightly over 20 percent of industry lending. The last time Stanbic went this low was in May 2009 where their prime lending rate was 15 percent.
The move is in line with the consistent decrease in the Central Bank Rate from 9 percent in January 2020, to 8 percent in April and a further decline to 7 percent in June. This is a historic low for the Central Bank Rate since it was introduced in July 2011 as a monetary tool.
In their Bank Lending Survey Report Fourth Quarter – FY 2019/20 outed this June, Bank of Uganda said that on a net basis, banks expected to keep their price terms and conditions broadly unchanged with a bias towards easing for average loans and prime borrowers and tightening for riskier loans in the quarter to September 2020.
“The expected net easing of average loans and prime borrowers is based on; further reduction in the CBR, the desire for commercial banks to offer concessions to existing clients, need to support clients in line with BOU COVID-19 credit relief guidelines and competition for clients,” noted the Central Bank.
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“As regards to non-price terms and conditions, banks expect to keep noninterest rate charges and maturity period largely unchanged with a bias towards easing for noninterest rate charges and tightening for maturity period. On the other hand, majority of banks expect to tighten the size of the loan and collateral requirements. The reasons cited for the anticipated net tightening of majority of the non-price terms and conditions include; uncertainty in the business environment that makes it difficult to predict future cash flows and the need to mitigate credit default risk in line with the current constrained economic environment,” the Central Bank further reported.
Key Figures
• Stanbic sets Prime Lending rate at 16% effective August 1st, 2020 from 16.5% in May and 17.5% at the start of 2020
• BoU has cut its CBR from 9% in January to 8% in April and all-time lowest 7% in June
• Stanbic’s PLR is 2.84 percentage points below the 18.84% industry rate published for May 2020
• 16% is the lowest PLR in over a decade. The bank’s previous lowest was in May 2009 at 15%.
