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Commercial banks resume payment of dividends

Anne Juuko, Chief Executive of Stanbic Bank Uganda. File Photo

Kampala, Uganda | THE INDEPENDENT | Shareholders in banking service companies will in a month’s time start receiving dividends for their investments, for the first time since 2019.

Stanbic Bank Uganda and Bank of Baroda will be the first to pay dividends to their shareholders, starting July 24th and August 4th, 2022 respectively, according to the notices to their shareholders.

The payment of dividends was suspended by the Bank of Uganda at the onset of the COVID-19 pandemic in early 2020, when the closure of most business activities led to a general economic slowdown.

This move by the regulator was aimed at ensuring commercial banks maintain adequate working capital as well as enough liquidity to keep the industry strong.

Late last month, BOU said it was lifting the blanket ban to allow banks that are ready to proceed with payment of the dividends, however, this would be on a case-by-case basis.

This would be after the respective bank provided enough proof that the payment of the proposed dividends would not affect the strength of the bank as far as carrying out its operations. Bank of Baroda has set aside 25 billion shillings for the year 2020.

“The shareholders at the Annual General Meeting on August 26, 2021 passed a resolution approving the dividend payment proposed by the Board of Directors at the rate of Uganda Shillings 10.00 per share for the Financial Year 2020, subject to approval from Bank of Uganda,” said Anne Tumwesigye Mbonye, the Bank of Baroda company secretary.

She said that last week, the Bank of Uganda gave a letter of ‘No Objection’ to Bank of Baroda’s request to pay out 25 billion shillings, which will now be effected on August 4. On what happens to 2021, the bank’s management says this well be concluded at the next AGM due next month. “Part of the agenda at the 52nd AGM will be to consider and if deemed fit to approve the dividend payout proposed by the Board of Directors at the rate of Uganda Shillings 10.00 per share for the Financial Year 2021.”

Bank of Baroda’s net profit for 2020 amounted to 83.37 billion shillings, and grew by 8.23 percent to 90.23 billion in 2021.  Baroda shareholders are hopeful that they will get all their dividends for all years, though this and the amounts involved, still depends on the outcomes of the subsequent AGMs and the Central Bank’s assessments.

The BOU’s permission to Bank of Baroda to pay dividends for the years ended December 2021 and December 2020, was “subject to staggering the payments over three months’ period effective July 2022. The dividend for the Financial Year 2021 will be paid latest by 21st November 2022, to shareholders on the register at the close of business on 07th November 2022, at the rate of Uganda Shillings 10.00 per share,” said the company secretary.

On its part, Stanbic Bank opted to pay dividends for the year 2021 and has also proposed to pay the dividends for 2022. “Following receipt of shareholder approval and authorization to take the necessary steps required to declare and effect the payment of dividends, the Board of Stanbic Uganda Holdings Ltd (SUHL) hereby declares a combined a dividend of UGX 1.95 per share to be paid in respect of the final dividend for year ended 31st December 2021 and the interim dividend for the year 2022,” says a note to the Financial Statement for 2021. The bank did not mention the fate of the 2020 dividend.

“On or about Monday, 25th July 2022, the dividend will be paid (net of withholding tax) electronically to the nominated bank accounts or mobile money wallets of eligible shareholders,” said Stanbic in a note to shareholders.

Since last year, Stanbic Bank Chief Executive Anne Juuko assured the company’s shareholders that it was ready to pay dividends, but that they had to abide by the directives of the regulator.

“As such, the bank’s proposed dividends for 2020, which form the pool of dividends for payment to the Stanbic Uganda Holdings’ shareholders, remain under review by BOU, the results of which will inform the 2021 dividend recommendation of the directors to the Stanbic Uganda Holdings’ shareholders,” said a statement by Board Chairman Japheth Kato.

However, at the AGM, the shareholders said they did not get mention of the 2020 dividend. “The 2020 dividend was just silently swept under the carpet as the management announced dividends for 2021 and the proposed for 2022,” said a shareholder who sought to know the fate of the earlier (2020) returns.

Stanbic says it has been authorised by BOU to pay 100 billion shillings declared as dividends for years 2021 and 2022. This will be split into two tranches of 50 billion shillings the year 2021 final dividends and 50 billion as interim dividends for 2022.

In his response, the Executive Director Supervision at BOU, Twinemanzi Tumubweine said the bank directors can decide how much to pay depending on their measure of the company’s strength, their immediate needs and the economic situation.

“Look at the provisions of Stanbic financials, look at their balance sheet of 2020 and 2021, you will notice one thing, the amount of specific provisions increased by almost 100 percent. In other words, instead of paying dividends, they chose to keep them to cover and reimburse depositors in the event the loans on their balance sheet went bad, which is normally a prudential decision. And it was prudent to withhold the dividends from 2020, use them to increase their ability to absorb losses in 2021, and just declare a small dividend for 2021 and pay an interim for 2022,” said Tumubweine.

Stanbic says they will issue a detailed explanation next week. According to Stanbic financial statements, the company made profits after tax worth 243 billion shillings in 2021, down from 258 billion in 2020. They are due to pay a dividend of 1.95 shillings per share, down from the 2.15 shillings paid in 2019.

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