Stanbic Bank registers Shs 107 billion in net half year profit

Stanbic Bank’s Mweheire steady – Bank registers Shs 107 billion in net half year profit, shareholders to get Shs 2.1 dividend per share

When Patrick Mweheire became the first Ugandan to head Stanbic Bank, there was some apprehension about how Uganda’s largest bank by assets would survive in the challenging economic environment and the highly competitive market under him. However, Mweheire is starting to prove the doubters wrong.

On Aug.10 when he was presenting the bank’s half year results, he was visibly steady and in total control. He had the figures to show it. Net profit grew by 57% to Shs 107 billion, up from Shs 68 billion in the same period last year, on the back of increased customer deposits and diversified revenue streams. Total revenue grew from Shs 261 billion to Shs 335 billion, representing a 28% growth during the same period under review.

This is the second time that Stanbic is registering a net profit during the first half of the year in three years, having registered Shs 68 billion in 2014 and Shs 57 billion in 2013. In 2012, the bank, which enjoys a 33% market share currently, registered Shs 58 billion. Because of the good performance, the shareholders will earn Shs 2.1 in dividends per share, up from Shs 1.34 last year.

A confident Mweheire told journalists that the increase in non-revenue streams including government securities, forex trading, commission, fees, and offering of advisory services, which are less sensitive to interest rates, contributed to the superb performance.

The bank also participated in an interest swap, where it covered the risk of the interest rate fluctuation that government might grapple with while financing various infrastructural projects including the 600MW Karuma and Isimba dams, Entebbe Express highways, and a myriad of road projects.

The non-revenue contribution to the total income increased from 37% in 2011 to 45% this year, signaling the bank’s shift from the traditional interest-based services such as loans.

“Overall, the last six months have been very positive for the bank,” Mweheire said, adding: “We are well-positioned to navigate these challenging times and continue growing going forward.”

However, loans advanced to clients grew by a paltry 1% in the first half of this year to Shs 1.9 trillion mainly due to a slowdown in the personal markets segment.

Non-performing loans also increased from Shs 30 billion to Shs 37 billion due to the lag effect of the high interest rates environment and elevated exchange rate, while the bank’s assets grew from Shs 3.8 trillion to Shs 4.5 trillion in the same period under review.

Also, customer deposits increased by more than Shs 500 billion to reach more Shs 2.8 trillion. On the other hand, operating expenses rose by 14.2% to Shs 175.4 billion up from Shs 153.5 billion.

Commenting on the results, Salima Nakiboneka, a fixed income and equities analyst at Crested Capital, a financial advisory firm, told The Independent that though Stanbic is not expecting to make huge profits as it has been the case in the first half, it will still post some profits in the subsequent half of the year as the interest rates slow down in response to the reduction in the Central bank rate leading to increase in the uptake of private sector credit.

She added that the slowdown in inflation is also likely to spur consumption.

Early this month, Bank of Uganda (BoU) cut its benchmark policy rate by one percentage point to 14% – the third successive reduction since April – with the Central bank Governor Emmanuel Tumusiime-Mutebile noting that the move is expected to support the recovery of the private sector credit and accelerate economic growth.

“The near term outlook for inflation has improved as a result of the recent stability of the exchange rate,” Mutebile said.

Currently, Stanbic’s prime lending rate stands at 23%, making it the third lowest to borrowers among the 25 licensed commercial banks in the country.

Going forward, officials were cautiously optimistic about the second half of the year.

“What we commit ourselves to is to keep following our winning strategy of listening and delivering for our customers,” Mweheire said, adding that the lender would now focus on establishing a strong retail deposit base for sustainability purposes in the remaining period through deposit mobilisation campaigns, deepening relationships with key partners, the government and leveraging on technological innovations.

He also revealed that the lender plans to leverage on ICT to cut costs aimed at reaching a single digit cost growth this year to grow its revenue performance.

So far, the lender has merged two full service branches and five customer services points countrywide in a move to cut operational costs.