Dividends for banking investors down but better than expected

Dividends for banking investors down but better than expected

Kampala, Uganda | ISAAC KHISA | 2020 was a tough year in almost all fronts: public health, production, new orders, employment, and demand, among others. The once growing economy contracted and interest rates took a deep dive as coronavirus cases surged.

However, the dividends set to be paid to shareholders seem to be more than expected as evidenced by the annual performance announcements by some of the country’s commercial banks that have released their results.

Stanbic bank, for instance, has proposed a dividend of Shs 1.86 per share, equivalent to Shs 95billion for the year ended Dec.2020. This, however, is below the Shs 2.15 per share, equivalent of Shs110bn, paid in the previous year.

dfcu bank has proposed a dividend of Shs 37.7bn, which is 1.6 times higher than the profits recorded during the year. Last year, dfcu did not pay any dividends to its shareholders on the advice of the central bank to preserve enough capital in the event that the coronavirus pandemic became catastrophic to the industry.

“dfcu’s Shs50.33 dividends per share is second highest in history of the bank in dividend payout,” said George Ochom, the general manager of dfcu Ltd. dfcu listed its shares on the Uganda Securities Exchange in 2004.

dfcu saw its net profit significantly drop by 68% from Shs 74.8 billion in 2019 to Shs 24 billion in 2020 due to increase in provisions for loans and advances, and impairment of the financial asset.

This was attributed to some of the loans that the lender took over from the Crane Bank transactions in 2017 but could not be recovered in the course of last year as a result of the pandemic.

The net loans loss provisions increased by 107% from Shs 14 billion in 2019 to Shs 30 billion in 2020 as the pandemic impacted on the customers’ business operations.

However, there was also a higher than anticipated impairment charge on the financial asset of Shs 50 billion in 2020 compared to Shs10 billion in the previous year.

The bank’s deposit base grew by 27% from Shs 2,039 billion to Shs 2,595 billion as customers preferred to hold on their cash instead of spending during the pandemic for fear of the uncertainties ahead.

Similarly, the asset base increased by 18% from Shs 2,958 billion to Shs 3,499 billion, upheld by strong growth in liquid assets as well as loans and advances.On the other hand, Stanbic Uganda Holdings (SUH) recorded a 6.9% drop […]

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