Stanbic Bank Uganda seeks to become a Bank Holding Company

The new move will see the lender venture into non-banking business

Kampala, Uganda | ISAAC KHISA | Uganda’s largest lender, Stanbic Bank Uganda, is finalising plans to become a Bank Holding Company (BHC), a step that would enable it access funding more easily but also tighten capital requirements and regulatory oversight.

BHC is a business banking model where a bank also owns subsidiaries that are involved in non-banking activities such as insurance, asset management and securities.

Patrick Mweheire, the lenders Chief Executive told The Independent that they have already submitted application to the industry regulatory, Bank of Uganda, for all requisite regulatory and corporate approvals, including the approvals of SBU’s shareholders following the Annual General Meeting slated for May.

“The creation of a holding company (‘HoldCo’) that will house the bank and other non-bank subsidiaries will enable the organisation to provide both banking and non-banking services to our customers and ensure a sustainable long-term business model for our future success,” he said.

He said the new business model will ensure that the bank sustain its market leadership position and attain business growth.

He, however, declined to disclose to the type of non-banking business that bank plans to venture into once granted approval to become a BHC.

“Until further announcements regarding the proposed reorganisation are made, Stanbic Bank Uganda’s shareholders and other investors are advised to exercise caution when dealing in Stanbic Bank Uganda shares,” Mweheire said, adding that the proposed re-organisation will have no adverse impact on bank’s shareholders, customers and employees.

Yiga Masajja, an executive at BoU told The Independent the SBU’s new step is already provided for under the Financial Institutions Act 2016.

“This reorganization means that the current bank is going to become a subsidiary of a holding company in Uganda,” he said. “Hitherto, it has been a subsidiary of a foreign holding company- Standard Bank based in South Africa.”

This new move follows the bank’s Board of Directors decision on Feb 14 to recommend to the shareholders that SBU undertakes a corporate reorganization to establish a Holding Company group structure to enhance customer value proposition while increasing the returns to its shareholders.

This comes barely three months since the Insurance Regulatory Authority of Uganda granted it an operating licence to venture sale insurance in partnership with insurance companies.

This development also comes at the time when the country’s banking industry projects to register subdued profits for 2017 owed to low private sector credit uptake amidst a reduction in the Central Bank Rate and the subsequent decline in interest rates. Banks start announcing their annual performance this month.

It is on this basis that the Stanbic Bank directors appears to be looking for new alternatives to enlarge their scope of the financial services through diversification of business lines to control the enterprise-wide risk, making the entity maintain the profitable growth trend.