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‘We are going to pay your dividends’

Anne Juuko, Stanbic Bank Uganda Chief Executive speaks at the AGM on June 02 at Serena Hotel. The meeting was held virtually for shareholders in line with COVID-19 prevention measures.

Stanbic Bank top executives tell shareholders as it rolls out offerings for women, targets oil and gas opportunities

Kampala, Uganda | JULIUS BUSINGE | Whereas many businesses reported reduced earnings for the year 2020, others like Stanbic Bank Uganda Ltd, have assured their shareholders that they will earn their profits (dividends) for the year once Bank of Uganda allows them to do so.

Speaking at the Bank’s Annual General Meeting held virtually in Kampala on June 02, its Board Chairman, Japheth Kato, said: “We have been seeking approvals; we will continue to visit and talk to the regulator until we pay your dividends.”

The amount in question is Shs95bn. The AGM was attended by 3, 029 shareholders, that account for approx.84% shareholding of Stanbic Uganda Holdings Limited.

Many experts have agreed that the year 2020 was challenging following the outbreak of the coronavirus pandemic that affected multi-sectoral operations and economies worldwide.

As a result, Bank of Uganda directed commercial banks to differ payment of dividends until such a time it is convinced that such payments would not jeopardise the overall capital base and operations of banks.

Uganda’s economy shrank to GDP growth rate of 2.9% compared to 6.8% in FY2018/19, spurred by the impact of lockdown measures to prevent the spread of COVID-19.

BoU kept its policy interest rate, the Central Bank Rate at around 7% to manage interest rates in addition to waiving limitations on the restructuring of credit facilities and providing exceptional liquidity assistance to financial institutions that required it.

“Despite the challenges, I am pleased to report that Stanbic Uganda demonstrated its resilience by delivering a solid financial performance driven by a strong focus on our strategic value drivers,” Kato said.

Appointed in March 2020 as Stanbic Bank Uganda Ltd Chief Executive, Anne Juuko said, through-out 2020, Stanbic Bank Uganda re-designed its business priorities and processes to meet clients’ needs thereby ensuring continuity of both their businesses as well as the economy at large.

“…as a direct result, the customers continued to trust us with their businesses,” Juuko said, leading to a 16.3% growth in client deposits.

Meanwhile, net loans and advances equally saw an increase of 26.8% year on year, closing at Shs3.6 trillion, despite the drastic drop in business activity during the second and third quarters of the year during the lock-down period.

As a result, Juuko said, the Bank had a solid all-round performance, with a profit after tax of Shs243billion albeit lower than the 2019 performance by 6%.

“We recognized the challenges our clients were facing as a result of the pandemic and embarked on providing urgent support to them through credit relief programs to alleviate some of these challenges,” she added.

Juuko said, around Shs850billion worth of loans were restructured in 2020.

The Bank also took a prudent measure of increasing provisions for non-performing loans by 110.8% to a tune of Shs91.7billion, which was more than double the previous year’s total of Shs43.5billion.

The growth recorded was above the private sector credit growth rate of 8.3%. The 2020 PSC growth was mainly supported by the facility extended to Government of Uganda towards budgetary support.

Customer deposits maintained a strong double-digit growth of 16.3% (Shs771 billion) albeit slower than the 2019 growth of 21%.

This growth was from both new clients and increased flows from existing clients across the Bank’s retail, SME and corporate and investment client base as the market experienced a build-up of cash balances in key anchor ecosystem clients.

Juuko explained that the driving force behind this continued growth in deposits is from a clear strategy of growing the liability base through leveraging their universal banking capabilities, to strengthen their position as the primary ‘banker of choice’.

On the other hand, the net interest income for the year increased by 9.3% to Shs490.8billion from Shs448.9billion recorded in 2019.

The upward trend was as a result of the increased investment in interest bearing assets, notably customers loans and advances together with increased investments in government securities.

Net fees and commission income dropped by Shs3.7 billion (2.3%) to Shs157.3 billion from the Shs160.9billion recorded in 2019. This was negatively impacted by reduced activity from short term facility fees, trade finance and a general reduction across transactional lines.

In addition, digital fees on retail digital channels were zero-ised in Q2 to support the shift to more cashless transactions as one of the COVID-19 response measures.

The Bank’s other executives like Samuel Mwogeza, the chief finance officer, said there were other challenges that the business faced apart from COVID-19.

He said: “The 2020 operating environment was a uniquely challenging one. The positive sentiment registered from the end of 2019 was swiftly overrun by a locust scare early in Q1 followed by the all-round disruption occasioned by the COVID-19 pandemic that significantly impacted the global and the local economy.”

He said that private sector credit growth across central sectors of the economy also weakened in 2020 from 12% as at December 2019 to 8% as at December 2020.

Mwogeza said approx.30% of the PSC growth recorded was in relation to capitalized interest on restructured loans under the Bank of Uganda sanctioned credit relief programme which further emphasizes the muted lending activity across the industry for the year in review.

New businesses created

As one way of supporting young entrepreneurs and ensuring that the Bank grows its client base in future, executives went on to implement a programme for equipping secondary school students with 21st-century skills, the National Schools Championship.

Despite the challenges in 2020, over 100 schools were engaged nationwide, with an additional alumni challenge comprised of nine business.

The Championship directly impacted 60,000 students, 200 teachers and resulted in the creation of 100 businesses.

Executives believe, these businesses will grow with time and create opportunities for the economy in general.

Targeting oil

The Bank’s executives said, oil and gas is a game changer for the country’s economy, and that the Final Investment Decision (FID) that was triggered in April this year with the signing of several agreements between Uganda, Tanzania and the oil companies, kick-started the process to first oil.

“We intend to enable the stakeholders to achieve the objectives most especially local content participation by supporting, training and financing potential local players in this space,” Juuko said.

Going forward, among other offerings, Juuko said, the Bank plans to serve women in business through SACCOs, Village Savings and Loans Associations using fast digital platforms among other avenues.

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