• Bank’s profit increased from 51b in 2008 to 191b in 2016. However, dividend payout has halved to 30% from 55%
• The CEO and Head Personal & Business Banking shared 5.9 billion in 2016
• The 1,018 employees, hold an average of Ugx. 13m loan
• On average, Stanbic Bank board member earns 100m
By Andrew Muhimbise
From the listing in 2008 Stanbic Bank in light of the privatization agreements and Goodwill, Stanbic Bank maintained a reasonable dividend policy of 55% payout of the net profits, in its first reporting year as a listed company, it had made a net profit of 53 billion for the financial year 2007.
Nine years later, the bank reported a net profit of 191 billion. This is an astronomical profit growth performance on all accounts.
However, these benefits have not reached the bank’s employees and shareholders in Uganda.
The two most senior executives of the bank; the CEO, Mr. Patrick Mwehiere and the Head Personal & Business Banking- took home a combined pay of Ugx. 5.9 billion in 2016, so effectively the bottom line ends at their pocket, their bonuses are computed with the underhand stuff seen and let to pass- they are to fill their pockets not to get the best deal for the company as a separate business entity.
Just to mention in passing the other staff members are just that numbers, the bank’s 1,018 employees, each is holding average debt of Ugx. 13m- a classic rat race set up named financial enablement!
Turning to dividends, the dividend payout has effectively halved to 30 perent.
Hiding behind Bank of Uganda
For the years 2015 and 2016 the narrative for depressed dividend payout ratios has been put on Bank of Uganda’s requirement to ensure no adverse effects on capital requirements over the foreseeable future.
Plain liars and cheats. On page 120 of the Stanbic Bank Uganda’s annual report they clearly show how the Bank’s Tier 1 and 2 Capital is way above the Financials Institutions Act (FIA) minimum ratio at 20% as opposed to the FIA 12%. They are using banking slang and gimmick to hoodwink the unsuspecting unsophisticated shareholders into buying into their underhand dealing and giving seemingly intelligent reasoning with dishonesty at the core.
The game plan
In typical raw capitalism, the Finance people at Stanbic Bank capitalize the bulk of spend as an intangible asset at 83 billion, leaving the 46 billion on the expense account ably hiding it away from the visibility of unsophisticated shareholders tucked away in the cash flow statement; CFO Mwogeza, his bosses in Johannesburg and his team look smart but probably have no idea of what constitutes of white collar crime.
In the external auditor’s report spread out on pages 100 to 102 of the Stanbic Bank Annual report 2016, the external auditors Klynveld Peat Marwick Gourdeler (KPMG) clearly dedicate serious mention on this transfer pricing issue of the purchase of the intangible asset of IT Finacle software purchased from the parent company where they also note the weak controls on that very IT software.
No-doubt Stanbic Bank Uganda was taken to the cleaners, the South African parent company, on this purchase of 130 billion Finacle software purchase and by consequence this cash recall by the parent company constrains future cash flow and effectively cuts out the dividend that could be paid to the all shareholders them inclusive- In classic bible sense like King Solomon with all his wives and concubines they have sent Urriah to the front line so they take his widow. The minority shareholders are Urriah- taking the heat from the Stanbic Stock price decimation.
Notwithstanding the fact that when you invest in IT you digitize, the irony is that Stanbic Bank’s paper consumption increased to 66 tons in 2016 from 65 tons in 2015.
For a Bank the size of Stanbic Uganda, a Software system costs anywhere around 15 billion inclusive of all support services, and with Stanbic’s relation and bulk purchase opportunity plus interlinked systems, this could cost much less, but hey the parent company sees the opportunity to ship out profits with ease.
Imagine the other purchases tucked away in the asset column of the balance sheet and even off balance sheet transactions, the meteoric rise in the Subordinate debt to $20 million where we pay interest in foreign currency to the parent company in South Africa and let depositors funds lying idle in utter abuse of the bank system of the credit creation process using cheaply mobilized deposits, maybe that’s why the bank rates are high.
Where is Stanbic Bank Board?
The average Board member of Stanbic Bank Uganda earns 100 million a year inclusive of both sitting allowance and monthly retainer, all paid in dollars. That is for just 12 meetings a year.
The Board of Directors is the thinking mind of a company and majority shareholders always aim to have absolute control of the board so they will always pick sometimes intelligent, but docile members who will toe the line when push comes to shove on especially group dealings where there is a parent company. The Stanbic Bank Uganda board has effectively been immunized to represent only her masters the South Africans.
The South Africans’ in a well-orchestrated move slowly moved the Kenyan executives who, coming from a more developed capitalistic nation of this region, were able to reign in on the excesses of the South Africans, ever wondered why the apartheid and its predecessor the Black Economic Empowerment capitalist thinking South African business never thrive in Kenya!! No MTN, Cfc Stanbic is a mid-level lender, Shoprite kicked out of the Kenyan market etc etc! Well Kenyan Executives match them on all parameters and their government understands capitalism as an economic system of balance.
The current Stanbic Bank Uganda board is at best a welfare board; the members basically earn a living from there- notably their joker Chairman. At the Stock Market, it is an open secret as to whom appoints the Stanbic Bank Limited board.
In real sense this Greedy Trinity ensures that the other shareholders of Stanbic Bank Uganda Limited listed on the Uganda Securities Exchange are powerless and cannot effectively benefit from their shareholding; if this doesn’t radically change the capital markets will lose appeal and relevance to the very people they are supposed to benefit.
The questions of: greed, wheeler dealing, influence peddling, exclusion, lies and dishonesty will have to be tackled head on; or else the big blue, just like it injected energy in the stock market at its listing in 2008 will lead the way in deflating market confidence thereby effortlessly joining the likes of UMEME.
Andrew Muhimbise, is a Stanbic Bank Uganda Limited Shareholder, based in KAMPALA.