By Stanbic Uganda

Stanbic Uganda today announced a 5% growth in after-tax profit to $56m for the year ended 2017.

The growth in the profitability of the bank was largely driven by growth in none-interest income, lower operational costs, reduced credit risk. None Interest Income expanded by 6.3% whereas operational costs declined by 3.5%.

Patrick Mweheire, the CEO Stanbic Uganda said that these low costs offset the lower returns on interest income.

“The banking sector suffered interest margin compressions because yields on government securities were collapsing and the reducing Central Bank Rate (CBR). Our lending to the private sector grew by 8.6%, higher than the industry average but income from the interest rate declined in line with the lower lending rates,” Mweheire said at the release of the Stanbic Bank results on Wednesday in Kampala.

In 2017, commercial banks including Stanbic Bank had to respond to the actions of Bank of Uganda (BoU) to reduce the benchmark lending rate. According to Mweheire, in response to the CBR, they reduced the Prime Lending Rate from an average of 24% in 2016 to an average of 19% at the end of 2017.

Stanbic is the largest lender and holds the largest number of deposits in the Ugandan market. The bank deposits grew at a much higher pace – 18.4% – than the lending portfolio. The 5% growth in lending, however, led to an expansion in the Stanbic asset base.

“Furthermore, given the relative size of our balance sheet with assets of Ushs5.4trillion  or  $1.5  billion,  the  bank  pro-actively supported the development of key sectors  such  as  power  and  infrastructure  by  providing    key    financial instruments necessary to protect the Government of   Uganda   (“GoU”)’s   execution   of   vital  and sizeable infrastructure projects,” Mweheire noted.

Higher dividend

With after-tax profit growth being 5%, Stanbic has increased the dividend to shareholders by 50%. In 2016, Stanbic paid a total $17m (Ushs60bn) to shareholders. In the results, the dividend will now rise to $25m (Shs90bn) – representing 45% of the total after-tax profit. According to Mweheire, the bank had strong profitability and a better capital position to support an increased dividend payout.

Holding company

Stanbic Bank is listed on the Uganda Securities Exchange (USE). In order diversify and do more than just banking the listed entity is going to be converted into a holding company. Stanbic Holdings Limited will have five companies operating under it. Mweheire revealed that the entities will be: A commercial bank, real estate company, a non-banking services entity (brokerage), Fintech Partnerships and capital optimization (leasing of the core banking system). This will give the bank access to more revenue streams.

As a commercial bank, Stanbic Bank is not allowed to participate in such activities due to restrictions by the regulator. Stanbic Uganda is 80% owned by the Standard Bank Group and 20% is listed on the USE.