Uganda: Dividends from banking investors down but better than expected

Kampala, Uganda | ISAAC KHISA | 2020 has been a difficult year on almost all fronts: public health, production, new orders, employment and demand, among others. The once-growing economy has contracted, and interest rates have plunged deeply as coronavirus cases have risen.

However, the dividends expected to be paid to shareholders appear to be higher than expected as evidenced by annual performance announcements by some of the country’s commercial banks that have released their results.

Stanbic Bank, for example, proposed a dividend of Shs 1.86 per share, equivalent to Shs 95 billion for the year ended December 2020. This, however, is lower than Shs 2.15 per share, the equivalent of Shs 110 billion Shs, paid the previous year.

dfcu bank proposed a dividend of Shs 37.7 billion, which is 1.6 times higher than the profits recorded during the year. Last year, dfcu paid no dividends to its shareholders on the advice of the central bank to preserve enough capital in the event the coronavirus pandemic becomes catastrophic for the industry.

“The dividends of 50.33 shs per share of dfcu are the second highest in the history of the bank in terms of dividend distribution,” said George Ochom, Managing Director of dfcu Ltd. dfcu listed its shares on the Uganda Securities Exchange in 2004.

dfcu saw its net profit drop significantly by 68%, from Shs 74.8 billion in 2019 to Shs 24 billion in 2020 due to increased provisions for loans and advances and depreciation of financial assets .

This has been attributed to some of the loans that the lender took over from Crane Bank transactions in 2017, but could not be collected over the past year due to the pandemic.

Provisions for net loan losses increased 107% from Shs 14 billion in 2019 to Shs 30 billion in 2020 as the pandemic impacted customers’ business operations.

However, there was also a higher than expected depreciation charge on financial assets of Shs 50 billion in 2020 compared to Shs 10 billion the previous year.

The bank’s deposit base increased 27%, from Shs 2.039 billion to Shs 2.595 billion, as customers preferred to hold onto their money instead of spending during the pandemic for fear of the uncertainties ahead.

Likewise, the asset base grew by 18% from Shs 2.958 billion to Shs 3.499 billion, supported by strong growth in liquid assets as well as loans and advances.

On the other hand, Stanbic Uganda Holdings (SUH) recorded a 6.9% drop in net profits from Shs 259 billion to Shs 241.6 million as the lender saw losses in value more than double to 91. billion Shs during the same period under review caused by COVID-19. pandemic.

Bank loans written off tripled to Shs 48 billion, while non-performing loans and other assets increased from Shs 183 billion to Shs 218.9 billion.

Likewise, the lender saw an increase in customer deposits from 4.7 trillion shillings to 5.5 trillion shillings, which further supported new loans to key sectors in dire need of support, especially during the peak. of the pandemic.

Net loans and advances increased 26.8% year-on-year, from 2.9 trillion shillings to 3.6 trillion shillings, as more customers took out loans to support their operations.

However, the total quality of assets has deteriorated year over year due to the impact of covid-19 on corporate clients. The bank’s provisions for bad debts and bad debts increased 110% to 91.8 billion.

Future prospects

It comes as banking executives expect the industry to rebound by citing expected growth in the economy.

Bank of Uganda forecasts economic growth of 3-3.5% in 2021 and 6-10% by 2023. However, the recovery will depend on the effectiveness of the measures put in place to contain the spread of the disease. COVID-19 in the implementation of the African Continental Free Trade Agreement and the expected rebound in tourism; improvement in global investment and continued recovery in exports thanks to renewed vigor in foreign demand.

Anne Juuko, Managing Director of Stanbic Bank, said their goal this year is to continue to deliver on their promise of making dreams possible for customers.

“Using digital technology, data and human insight, we aim to understand our customers, partners and employees as deeply and with empathy as possible,” she said.

“One of the ways we are improving the customer experience is our digital loan offering, where customers can now apply for a loan online or on their mobile phone and get the loan in under five minutes. By creating greater efficiency, our clients save time and we make it easier for them to access the financial support they need.

Juuko said the bank also plans to make sure it has a strong risk management framework that ensures it is doing business in the right way to improve the value of the customer experience.

She added that the lender is also committed to implementing social, economic and environmental (SEE) priorities that aim to deliver inclusive, sustainable and environmentally sustainable value to its shareholders and the societies and economies it serves.

“As a company, we remain optimistic about a faster recovery of the local economy thanks to the success of a national vaccine deployment program and a resilient business community,” added Mathias Katamba, Managing Director and CEO of dfcu.

“We will also continue to invest in capabilities that increase convenience for customers in the digital and alternative channel space and innovate in products and services that improve the efficiency of our services and deliver a great customer experience at all levels. . “

Katamba said that although COVID-19 challenges remain for a number of sectors, the bank remains committed to supporting small and medium-sized enterprises, advancing the cause of women in business, supporting key sectors of the economics in agriculture, manufacturing, trade, construction, Communications and services.

Katamba added that the lender has laid the groundwork for playing an active role in the emerging oil and gas sector.

Overall, the country’s banking sector, which has 25 commercial banks, is expected to post moderate profit growth for 2020 due to the pandemic disrupting business operations.

Last February, the BoU extended the bank’s credit relief measures for six months to help commercial banks and other supervised financial institutions continue with loan restructuring and also provide loans to commercial banks and financial institutions for that they lend to the business world.

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