KAMPALA — Shareholders of Post Bank Uganda have voted to raise the lender’s capital base and be on the right side of financial regulations imposed four months ago.
Andrew Otengo Owiny, the Board Chairman of PostBank said the state-owned lender seeks to achieve the minimum Capital requirement of UGX 150 billion by 2024.
“Postbank is confident that it will achieve its minimum capital requirements of UGX150 billion by June 2024. What I’m trying to emphasize here is that we have committed as the Board to give PostBank more money. We’re very happy that the government was able to take this bold step of making sure that the bank is not underfunded and it meets its financial obligations,” Mr. Otenga said on Tuesday as
PostBank announced its financial results with a 19% increase in net profit for the year ended December 31st, 2022.
The move came just four months after Uganda’s Finance Minister Matia Kasaija signed a statutory instrument increasing minimum capital for banks by 500 per cent, from $6.67 million to over $40 million.
The idea, according to the Bank of Uganda (BoU), is to prevent commercial banks from falling off the cliff when economic shocks hit their clients.
According to the new rules, regulated micro financiers’ paid-up capital also increased to $6.6 million from $267,636.
The new capital requirement has thrown a spanner in Uganda’s banking sector works. The industry has reported one exit — Afriland First Bank last year after 16 months in the market.
Top Finance Bank was bought by Djibouti-based Salaam African Bank after the original owners failed to infuse capital. Orient Bank was acquired by I&M Group for the same reason.
Uganda last revised the paid-up capital for commercial banks in 2010 while that for credit institutions and deposit-taking institutions was last revised in 2004 and 2003 respectively, according to the BoU.
“The increase in paid-up capital is long overdue and is intended to match the dynamism in the economy, incentivize shareholder commitment, and enable institutions to withstand shocks and to converge with regional peers among whom Uganda effectively has the lowest paid-up capital,” Tumubweine Twinemanzi, the director in charge of supervision at BoU said.
The new rules follow trends in the region where some banks collapsed after reporting bad loans.
Postbank reported a net profit of UGX. 15.1 billion, a solid year-over-year growth of 19.3% up from the UGX. 12.2 billion net profit posted in 2021.
PostBank’s total assets grew significantly by 21.3% from UGX. 745 billion in 2021 to UGX. 946. 6 billion in 2022, which is almost 1 trillion.
The bank’s total income also increased from UGX. 144.5 billion in 2021 to UGX. 159.2 billion in 2022, which can be attributed to the bank’s digital transformation journey that began in 2020.
Julius Kakeeto, Managing Director, PostBank Uganda, commented on the bank’s financial performance and thanked the shareholder for supporting PostBank.
“Our shareholder has resolved to capitalize retained earnings of the UGX. 19Bn as at 31st December 2022.”
Digital channels including PostMobile – *263#, PostApp, PostOnline, PostAgents and smart ATMs, experienced tremendous growth, with digital transactions representing 60% of all bank transactions for the year, compared to about 10% 3 years ago.
Despite the challenging economic conditions, the bank’s shareholders’ equity increased to UGX. 135.6 billion in 2022 from UGX. 117 billion in 2021.
Mr. Otengo expressed his satisfaction with the bank’s performance, noting that the bank focused on improving efficiency of its operations and improving customer service.
“We opened 5 new branches, rolled out smart ATMs, enhanced the PostApp and started on a journey to serve the PDM with a solution that ensures funds reach the final beneficiary. It is still awaiting regulatory approval.” He added that considering where the bank was 3 years ago, PostBank has made tremendous strides in the right direction. “We are looking forward to a future where we take leadership in supporting Agribusiness and Micro Small & Medium Enterprises support which are core to the economy of this country.”
PostBank’s capital position remains strong, with the paid up capital of UGX. 129Bn following shareholder’s resolutions from the Annual General Meeting.
This is above the interim limit of UGX. 120n set by Bank of Uganda (BoU).
Addressing the media after the AGM, the shareholder, represented by Minister Evelyn Anite, the state minister for Investment and Privatization, commended the Board and Management of PostBank for the stellar performance over the last 3 years.
She challenged them to sustain this level of performance so as to serve more Ugandans.
The bank’s end-of-year accounts and accompanying financial statements were audited by the Auditor General and found consistent with International Financial Reporting Standards (IFRS) and the Uganda Companies’ Act plus the amended Financial Institutions Act 2004.
In terms of its capital and financial performance, the bank is in a strong position to expand and serve its customers with better competitive products and innovations in the future.