Analysis of loan portfolio performance of commercial banks in Uganda: case of Guaranty Trust Bank Limited
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The study main purpose of the study was to analyze the loan portfolio performance of commercial banks in Uganda using GTB Bank as a case study. It was guided by three objectives which included identifying the strategies employed by GTB Bank Limited in managing loan portfolios, to assess the efficacy of strategies employed by GTB Bank Limited in managing loan portfolios and to analyze the challenges faced by GTB Bank Limited in effectively managing loan portfolios. The study used a cross sectional research design where both quantitative and qualitative approaches were adopted. The cross sectional study design was used because the information on loan portfolio performance of commercial banks in Uganda using Guaranty Trust was collected from a sample of the population at one point in time over a cross-section of many people. Data was collected from a sample of 78 respondents who included managers and Banking Officers. Quantitative data was analyzed using statistical package for social scientists (SPSS) while qualitative data was reported as obtained. The study found GTB Ltd excels in risk management, credit screening, and customer education for loan management. Yet, there are concerns about underutilizing loan restructuring and doubts about the effectiveness of collateral in mitigating loan risks. The study findings show staff confidence in GTB Ltd's Loan Loss Reserve Ratio, Loan-to-Deposit Ratio, Capital Adequacy Ratios, Asset Quality Ratios, Risk-Weighted Assets management, and operational efficiency. However, there's skepticism regarding GTB Ltd's management of the Non-Performing Loan Ratio. Economic instabilities affect GTB Ltd's loan management, creating challenges in risk assessment, monitoring, and collection. Borrower financial literacy issues and communication inefficiencies also impact loan management, while stringent regulations are not considered a significant challenge by respondents. It was recommended that the bank should continually review and update these policies in line with evolving market dynamics and regulatory changes, further evaluation and periodic reassessment of the Loan Loss Reserve Ratio should be conducted by GTB Ltd to ensure alignment with changing economic conditions and potential shifts in risk profiles, GTB Bank should diversify its loans across various sectors and adopt proactive risk management strategies to navigate economic fluctuations.