Commercial banks resume payment of dividends

Anne Juuko, Managing Director of Stanbic Bank Uganda. Picture file

Kampala, Uganda | THE INDEPENDENT | Shareholders of banking services companies will start receiving dividends for their investments within a month, for the first time since 2019.

Stanbic Bank Uganda and Bank of Baroda will be the first to pay dividends to their shareholders, effective July 24 and August 4, 2022 respectively, according to notices to their shareholders.

Dividend payments were suspended by the Bank of Uganda at the onset of the COVID-19 pandemic in early 2020 when the closure of most business activities led to a general economic downturn.

This decision by the regulator was aimed at ensuring that commercial banks maintain adequate working capital as well as sufficient liquidity to maintain the solidity of the sector.

Late last month, the BOU said it was lifting the blanket ban to allow willing banks to proceed with dividend payments, but that would be on a case-by-case basis.

This would be after the respective bank provided sufficient evidence that the payment of the proposed dividends would not affect the soundness of the bank in terms of carrying out its operations. Bank of Baroda has set aside 25 billion shillings for the year 2020.

“Shareholders at the Annual General Meeting on August 26, 2021 passed a resolution approving the payment of the dividend proposed by the Board of Directors at the rate of Uganda Shillings 10.00 per share for the financial year 2020, subject to the Bank of Uganda approval,” said Anne Tumwesigye Mbonye, ​​Corporate Secretary of Bank of Baroda.

She said that last week the Bank of Uganda sent a letter of “no objection” to the Bank of Baroda’s request to pay 25 billion shillings, which will now be made on August 4. On what will happen in 2021, the bank’s management says this will be concluded at the next AGM scheduled for next month. “Part of the agenda for the 52nd AGM will be to consider and, if deemed appropriate, approve the payment of the dividend proposed by the Board of Directors at the rate of 10.00 Ugandan shillings per share for the 2021 financial year.”

Bank of Baroda’s net profit for 2020 was 83.37 billion shillings and increased by 8.23% to reach 90.23 billion in 2021. Baroda shareholders hope they will receive all their dividends for all years, although this and the amounts at stake always depend on the results of subsequent general meetings and the assessments of the Central Bank.

BOU’s authorization to Bank of Baroda to pay dividends for the years ending December 2021 and December 2020 was “subject to the timing of payments over a three-month period commencing July 2022. The dividend for the 2021 financial year will be paid on or before November 21, 2022, to shareholders of record at the close of business on November 07, 2022, at the rate of Uganda Shillings 10.00 per share,” the company secretary said.

For its part, Stanbic Bank has elected to pay dividends for the year 2021 and has also proposed to pay the dividends for 2022. “After receiving shareholder approval and authorization to take the necessary steps to declare and make the payment of dividends, the of Stanbic Uganda Holdings Ltd (SUHL) hereby declares a combined dividend of UGX 1.95 per share payable in respect of the final dividend for the year ended 31 December 2021 and the interim dividend for the year 2022,” says a note to the Financial Statement for 2021. The bank did not discuss the fate of the 2020 dividend.

“On or about Monday, July 25, 2022, the dividend will be paid (net of withholding tax) electronically to the designated bank accounts or mobile money wallets of eligible shareholders,” Stanbic said in a note to shareholders. .

Since last year, Stanbic Bank chief executive Anne Juuko has assured the company’s shareholders that it is ready to pay dividends, but that they must comply with the regulator’s guidelines.

“As such, the bank’s proposed 2020 dividends, which form the pool of dividends to be paid to Stanbic Uganda Holdings shareholders, remain under review by BOU, the results of which will inform the directors’ 2021 dividend recommendation. to Stanbic Uganda Holdings shareholders,” Board Chairman Japheth Kato said in a statement.

However, at the general meeting, shareholders said they had not heard of the 2020 dividend. “The 2020 dividend was quietly swept under the rug as management announced the dividends for 2021 and the proposals for 2022,” said a shareholder who sought to know the fate of past returns (2020).

Stanbic says it has been authorized by the BOU to pay out 100 billion shillings declared as dividends for the years 2021 and 2022. This will be divided into two tranches of 50 billion shillings for the final dividends of 2021 and 50 billion as dividends. interim dividends for 2022.

In his response, BOU’s executive director of supervision, Twinemanzi Tumubweine, said bank managers can decide how much to pay based on their measure of the strength of the business, their immediate needs and the economic situation.

“Look at the provisions in Stanbic’s financial statements, look at their balance sheet for 2020 and 2021, you’ll notice one thing, the amount of specific provisions has increased by almost 100%. In other words, instead of paying dividends, they chose to retain them to cover and reimburse depositors in the event of bad debts on their balance sheet, which is normally a prudential decision. And it was prudent to withhold dividends from 2020, use them to increase their ability to absorb losses in 2021, and just declare a small dividend for 2021 and pay an installment for 2022,” Tumubweine said.

Stanbic says they will post a detailed explanation next week. According to Stanbic’s financial statements, the company made after-tax profits worth 243 billion shillings in 2021, up from 258 billion in 2020. They are expected to pay a dividend of 1.95 shillings per share, up from 2.15 shillings paid in 2019.

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