On June 2, 2022, Stanbic Uganda Holdings Limited (SUHL) held its Annual General Meeting (AGM) during which Board Chairman Japheth Katto revealed to shareholders that the organisation’s anchor subsidiary—Stanbic Bank, had secured Central Bank (the regulatory body) approval to pay a dividend of UGX100bn for the period, 2021 and 2022, provisionally. This would be the first post-pandemic dividend payment having failed to secure approval for 2020 dividend as the regulator implemented prudential measures to ensure liquidity safeguards for regulated financial institutions during the pandemic. In this exclusive interview with SUHL Chief Executive Andrew Mashanda, he provides an update on the dividend payment and shares a forecast for the year ahead, see excerpts below.
You held your Annual General Meeting last month—what were the key outcomes and what do they mean for the business moving forward?
Indeed, we held our AGM (virtually) on Thursday June 2, 2022, and it is always a pleasure when we report back to our shareholders. We shared a comprehensive update for the year ended 31 December 2021 where we highlighted our performance.
We were pleased to report an 11 percent growth in Profit After Tax under a challenging operating environment. Our balance sheet which drives most of this growth remained resilient and well positioned for growth in 2022. We noted the trust and support of our customers which continues to be the foundation of our business success and ability to create value for our investors.
Perhaps the most notable outcome for our shareholders was the announcement to pay out a dividend of UGX100 billion after securing regulatory approval this will be the first post-pandemic payout by a regulated financial institution in Uganda and we are thankful to our investors who have remained patient and supportive through the last three years.
Indeed, going into the AGM, shareholders were not sure they would be getting a dividend this year as your request to pay was pending regulatory approval—what factors have informed the regulator’s change of stance, giving you the greenlight?
We must start by appreciating the regulator’s intentions in asking listed banks to hold onto their liquidity by pausing divided payment for the year 2020. The pandemic was still raging and the economic outlook for the country wasn’t clear. Indeed, the pandemic dragged on for another full year through 2021, proving that the regulator was right in being cautious. Our ability to pay a dividend for 2020 and 2021, notwithstanding, we had to kowtow to regulatory counsel to wait for a better economic outlook so we have been waiting and engaging at the same time.
As a listed entity, our work is to manage the delicate balance between preserving capital and delivering a return to our shareholders. Therefore, the approval to payout the UGX100billion is proof that the regulator is confident about the economic prospects of the country as well as our own liquidity levels and ability to continue delivering solid returns to shareholders.
Coming amid a tough economic environment, the UGX100bn dividend is obviously a huge relief. When should shareholders expect to have money in their accounts?
Shareholders should expect the payment to be made on the July 25, 2022, which is when the money will go into the shareholders accounts. All the shareholders who will have been on the register by July 4, 2022, will be eligible to receive a dividend.
So, the dividends for 2022 will be paid on 25th July but you need to have been on the register by the 4th of July anyone who wants to take advantage of it, can buy shares between now and the 4th of July.
What is the rationale for that time-lag between the book closure date and the settlement date?
It is how the market is designed—the idea is that after a dividend declaration, the market is given an opportunity to trade based off that new information which has come to the market. That was allowed up to the book closure date of the 5th of July.
Any shareholder who is on the record as holding shares on the book closure date, will be paid a dividend. And after the book closure date, time is allowed to deal with the administrative aspects of ensuring that the securities exchange process has completed the reconciliation to know that those who have traded towards that time are properly reflected on the register. That window is also allowed, to ensure that all those on the register will have proper payments and settlement details.
What is the status of the 2020 dividend will it be paid?
No, and the reason is that our approach towards dividend declarations has always been forward-looking. That way, we are able to assess dividend payments based on the outlook of the operating environment and growth prospects.
The 2020 dividend proposed will therefore not be paid since it was also added back to capital after regulatory approval to distribute it wasn’t granted. Payout of dividends on the profit we made in 2021 as well as declaring an interim dividend out of the first half of 2022 reflects a forward-looking approach on dividend declaration.
We are paying an interim dividend in 2022 which is unique but certainly not the first time we have done so. We recognize that our shareholders have not received dividends for the past two years and interim dividend declaration allows us to increase their cash position as the economy rebounds.
Let’s look at your Return on Equity you had higher RoE in 2021 compared to 2020, but you declared lower dividends, what other factors were in play here?
Dividend declaration and capital re-investment is a careful balance that most organization must achieve. Re-investment of capital to ensure sustainable growth is critical to enhancing shareholder value.
In the periods where dividend was not declared, capital re-invested in SUHL operations generated a return of 20.5% and 19.4% in 2020 and 2021 respectively. This is a strong return on investment for our shareholders and show that we are still able to deliver value with the capital pool we had.
We also consider several factors in arriving at the quantum of dividend to be declared. Specifically, we consider opportunities to grow, and the capital required to support growth, we consider regulatory requirements and any expected changes, we factor any potential stress events that may impact our business.
As you would expect these factors change from time to time and therefore the quantum of dividend to be paid is reviewed with this context our 2020 and 2021 engagements with the regulator and their insights on financial stability was also a key consideration in determining the level of dividend. We are seeing promising prospects since we re-organized our group structure to better serve our clients.
We are also positioning ourselves to serve the key growth sectors in Uganda. We are cognizant that the impact of COVID as well as the geopolitical tensions and supply chain disruptions are yet to be fully felt and we need to remain resilient during this period all these factors informed our decision to pay UGX 100billion as dividend.
Despite the global macro-economic pressures that are beginning to transmit into the Ugandan economy, we believe that the prospects for growth are still there for us to take advantage of. We remain mindful of the fact that inflation is ticking upwards, and this could ultimately put pressure on other macro-economic indicators. Nonetheless, we are confident that SUHL is well positioned to serve our customers and remain a key player in driving Uganda’s growth.
Your parting shots, please?
We thank our customers, for choosing to partner with our different businesses under SUHL. We appreciate our shareholders for their continued trust in our business and for remaining patient through the past three challenging years.
We congratulate and wish well, Mr. Samuel Zimbe who retired from the SUHL Board, following six years of distinguished service. We are grateful for his invaluable contribution and commitment to the company and wish him all the best in future endeavors.