Stanbic Bank Uganda has paid out a total of Shs 110 billion to its shareholders for financial year 2019, continuing a long track record of returning consistently positive earnings despite prevailing challenges.
At the peak of the Covid-19 pandemic last year, Bank of Uganda (BoU) directed supervised financial institutions to defer all discretionary payments, including dividends, until they can demonstrate a solid financial base.
After confirmation by BoU that the bank was adequately capitalized, it gave the bank a go ahead to pay dividend for the 2019. On December 29th, 2020 the Board of Directors Stanbic Uganda Holdings Limited, the parent company of Stanbic Bank Uganda Limited approved a final dividend payout of Shs 2.15 per share.
Speaking at Kampala Serena Hotel, Anne Juuko, the Chief Executive of Stanbic Bank Uganda said that despite a very challenging season, the bank was able to wade through and ensure it keeps its promise to pay its shareholders of ensuring they consistently receive a return on their investment.
She said, “In 2018, our shareholders received Shs 97.5 billion in dividends. Despite the slowdown in business activities, raising trade deficits and increased Non-Performing Loans, we have decided to increase the dividends pay-out by 13% to give back the trust placed in us by our shareholders.”
“Bank of Uganda projections show the economy will grow by three to 3.5 percent in 2021 and 6% to 10% by 2023. This will be as a direct result of the rollout of Covid-19 vaccines; implementation of the African Continental Free Trade Agreement (AfCTFA); an expected rebound in tourism; improvement in global investment and the continued recovery in exports due to a revived strength in foreign demand,” Juuko said.
However, on a cautionary note, commodity and tourism dependent economies remain vulnerable over the next 12 to 18 months. Uganda also has the highest number of active cases of Covid-19 in the region and an outbreak of a second wave cannot be ruled out.
The BoU’s Central Bank Rate has remained fixed at 7% for the ninth month in a row into February 2021 and this trend is projected to continue in 2021. Consequently, commercial bank lending rates have also fallen from 13.8% in January 2021 to 12.3% in February with Stanbic dropping its average prime lending rate from 18% to 16.6% (1.4%) thus saving customers borrowing in local currency at least Ugx 26bn in interest payments off a local currency book of Ugx 1.9 trillion as at end of December of 2019.”
Inflation peaked at 4.7% in July 2020, but came down to close the year at 3.6%. It is expected to remain within the Central Bank’s medium target of 5% throughout the year while the Uganda shilling is expected to average 3,750-70 for ’21 from current levels of 3,660/70
Samuel Mwogeza, Chief Financial Officer at Stanbic said, “Uganda’s private sector credit is expected to grow rapidly. The Stanbic Purchase Manager Index (PMI) had dropped to record lows in April 2020, but regained momentum in the second half of the year. It crossed back to the 50 area in February 2021 as employment increased for the first time in three months, after the elections and a wider reopening of schools. There is renewed optimism and a pickup of business activities. This ended a two-month sequence of job cuts and a subsequent increase in staffing and employment levels.”
He said the sectors of agriculture, manufacturing, utilities and transport registered growth signaling commercial banks’ appetite to provide financial support. However, the trade sector was hit by disruptions in access to both working capital and bottlenecks in imports and export processes. Small and medium enterprises (SMEs) were the most impacted by the pandemic causing a decline in business activities and an increased need for credit restructuring.
BoU encouraged commercial banks to restructure credit facilities for their clients and waive limitations on loans to minimize the likelihood of previously sound businesses going into insolvency. Uganda’s financial regulator also decided to moderate credit relief measures to allow banks adjust the criteria of Non-Performing Loans.
Mwogeza said the government’s interventions in such target sectors like tourism and education are likely to harness economic growth and provide substantial resources to support SMEs. The government has already stepped support in the form of funds, training and other capacity building in enterprise development for SMEs so that they are able to withstand the present shocks.
Uganda financial markets remain one of the favorite destinations for portfolio investors. With an improvement in tax administration, it will attract significantly more inflows. This would eventually lead to lower borrowing costs for the government.