Whereas Stanbic continues to dominate in different aspects, there are pressure points in which its competitors have been closing in. Photo / File
For years, Stanbic has ruled banking, top profits, strong dividends, and income that has made it a darling both on the Uganda Securities Exchange (USE).
But the 2024 results reveal a new twist in the plot.
Yes, Stanbic pulled in a hefty Shs478b in profit and clocked a handsome 24.3 percent return on equity.
But its challengers - Absa, Bank of Baroda, and dfcu - are no longer just background players.
They are faster, leaner, and eyeing Stanbic’s turf, especially in digital banking and retail growth.
No question, Stanbic isn’t just ahead – it is miles ahead. In 2024, it booked Shs478.1b in net profit, more than twice Absa’s Shs178b, nearly four times dfcu’s Shs72.1b, and far ahead of Baroda’s Shs113.7b.
And it’s not just about big numbers - it’s also about efficient use of shareholder capital.
Stanbic delivered a 24.3 percent return on equity, making it one of the most capital-productive banks.
Why does this matter?
Profitability without discipline is just luck. Stanbic’s edge is built on three pillars: diversified income, efficient capital use and a clean loan book.
The bank doesn’t rely heavily on lending. In 2024, 35.7 percent of its revenue came from non-interest sources - forex trading, digital transaction fees, and insurance products.
That kind of spread not only cushions it from interest rate swings but signals a mature business model that can thrive even when the loan book slows down.
A deeper dive using the DuPont Return on Equity formula shows that Stanbic isn’t just making money – it is squeezing real value from every shilling.
Strong margins, high asset turnover, and smart leverage choices all come together to deliver elite returns.
With non-performing loans at just 1.5 percent, Stanbic sets the standard for credit quality, and that is not by accident - it is disciplined lending, tight risk controls, and strict monitoring.
And for investors, fewer bad loans mean lower provisions, more stable earnings, and greater capacity to lend where growth lies, such as SMEs.
Pressure points
Whereas Stanbic’s dominance looks solid, there are pressure points emerging that could chip away at its dominance, as competition edges upwards.
Absa is coming in hot, making bold moves in digital banking and card services - Stanbic’s retail turf.
Absa’s user experience is slick, mobile, and gaining traction with younger, urban customers, while dfcu, once bruised, is rebuilding, with bets on digital infrastructure and SME lending - two of Stanbic’s growth engines.
In the other corner, Baroda isn’t chasing headlines, it is quietly building on its conservative, low-risk, and loyal customer base to work some handsome numbers.
Of course, Stanbic is earning profitably from foreign exchange, but the unpredictable nature of forex makes it a double-edged sword that could swing with global and regulatory shocks.
If spreads tighten or trade flows dip, those earnings can wobble.
A good hold?
Investors know well that Stanbic can weather financial cycles, especially if interest rates drop or lending slows.
The bank’s non-interest income earnings provide a reliable buffer, generated from foreign exchange trading, digital services, and insurance, among others.
These data show that, delivers higher margins than traditional lending, and with less capital investment, which makes it a smart, scalable revenue stream. But it’s not cheap to build.
Kenneth Legesi, an investment analyst who is also the chief executive and investment officer at Ortus Africa Capital, says a robust non-interest income engine requires serious investment in tech infrastructure, client engagement, and regulatory trust, high hurdles that smaller banks struggle to sustain.
For shareholders, this matters because it signals resilience and growth potential.
Then there is the loan book. Stanbic has kept non-performing loans at a market low, just 1.5 percent, down from 3.5 percent in 2015. That speaks volumes about its disciplined credit culture and efficient loan monitoring.
Compare that to dfcu, whose non-performing loans hovered above 5 percent for years, only recently improving to 4.4 percent, you get a clearer picture.
Even Absa and Baroda, while generally stable, haven’t matched Stanbic’s clean sheet.
“For investors, this translates to lower provisioning costs, more consistent earnings, and the ability to lend aggressively where it counts without blowing up the risk profile,” Legesi says in an analysis about Stanbic’s competitive edge.
Dependable dividend
Stanbic’s dividend machine keeps humming. In 2024, it paid Shs5.86 per share, translating to a 12.5 percent yield.
Cost-to-income ratio
Unlike other banks, Stanbic’s cost-to-income ratio is relatively high, sitting at 47.2 percent, decent, but less efficient than Absa’s 45 percent and Baroda’s 39.5 percent.
“If Stanbic can pull cost-to-income ratio closer to 44 or 45 percent, that is a serious profitability unlock - and it boosts dividend sustainability,” Legesi says, which in others words calls for tightening of the belts, to lift the margins.
The digital chase
Away from the traditional service crowd, the digital chase is another pressure point.
Stanbic still leads, but Absa is sprinting in. Since 2020, Absa has turbocharged mobile banking, card services, and Fintech adoption, grabbing a share in both users and non-interest income.
This now means that for Stanbic, it’s no longer enough to have a strong digital presence - it must accelerate investment in experiences, SME tools, and customer retention.
The strong foreign exchange pot
Forex trading remains Stanbic’s non-interest income heavyweight, growing at a compound annual growth rate of 11.4 percent since 2017.
The bank’s bancassurance is growing at a 22 percent compound annual growth rate, while digital fees are growing at approximately 12 percent.
However, Absa remains the biggest challenger with its innovative and efficient machine delivering 37 percent of its revenue from non-interest income.
On the other hand, Baroda stays disciplined and efficient, but digitally quiet, which may cap future growth, while dfcu is recovering, but wrestling with non-performing loans (4.4 percent) and a cost-to-income ratio of 64 percent.
Shareholders’ track list
As Legesi frames it, Stanbic is certainly a long-term hold, but that doesn’t beg complacency. There are a few things to watch:
Can Stanbic bring cost-to-income ratio below 45 percent? Efficiency is the new battleground - especially as digital platforms scale without bloated overheads.
Will digital banking and SME lending gain more ground? These are high-growth, high-stakes sectors.
Is the dividend level sustainable? A juicy yield is only as good as the profits behind it. Can non-interest income stay resilient if forex markets tighten? Diversification is the best defense.
“Despite rising competition, Stanbic still checks many boxes for a quality long-term investment,” argues Legesi. “But this is a shifting battlefield. The lead isn’t permanent - especially when the challengers are catching up fast.”
