Mumba is expected to assume his role as Stanbic Bank chief executive in March next year. Photo / File
Stanbic, Uganda’s largest bank by assets, on Monday, ended a year-long leadership vacuum, naming Kenneth Mumba Kalifungwa as the new chief executive.
Mumba is expected to join Stanbic Bank on March 1, 2025, to continue the bank’s push of driving Uganda’s growth.
His appointment, though expected earlier, now fills a vacuum left when Anne Juuko, the former chief executive, last December transitioned to a regional role overseeing currency trading, based in Nairobi, Kenya.
Mumba is expected to continue fostering innovation, enhance customer satisfaction, and deliver asset and profit growth.
Half year performance
As a bank, Stanbic didn’t publish its half-year financial results as a regulatory requirement.
However, the holding company - Stanbic Holdings – published consolidated group results that painted a paint a picture of continued resilience and steady growth, underpinned by effective cost management, revenue diversification, and reduced impairments.
During the period, Stanbic reported a growth in costs of 6.2 percent to Shs637b. However, this was lower than the revenue growth of 8.1 percent, which was a positive jaws ratio of 1.9 percent - revenue outpaced costs.
Customer loans, the bank’s main revenue source, rose by 9.5 percent to Shs4.4 trillion, while deposits rose by 4.9 percent to Shs6.6 trillion.
Notably, 17.2 percent of the bank's income was from non-interest revenue, reflecting a healthy diversification of earnings and reducing over-reliance on interest income, which is typical of many financial institutions.
Credit impairments declined from Shs39b in the same period in 2023 to Shs14.4b, signaling stronger loan quality and recoveries from previously written-off assets, which enhanced the bank’s asset book and supported profit growth.
Banks earn by lending out deposits at higher interest, for which depositors are offered a relatively small rate. The difference (net interest margin) is the bank's profit.
So in this case, Stanbic Holdings’ profits in the first six months of 2024 rose by 17.6 percent from Shs200b to Shs236b, which together with other factors, drove the return on equity up by 1.2 percent to 25.1 percent.
Thus, based on the performance, the board proposed a 12 percent increase in interim dividends, raising the payout to Shs140b or Shs2.73 per share.
Stanbic Bank's strategic focus on efficiency, loan quality, and revenue diversification appears to be paying off, ensuring sustainable growth, amid a competitive banking landscape.
Cash flow analysis
Mumba will need to focus on specific areas to ensure continued stability and growth for Stanbic Bank.
One pressing challenge is revitalising the bank’s loans and advances to other banks, which have dropped significantly from Shs646b in June 2023 to Shs238b by June 2024.
The fall suggests changing market dynamics or a strategic shift that requires evaluation. Beyond this, Mumba must tame the growth in ‘amounts due from group companies’, which during the half year rose from Shs351b to Shs1 trillion.
Receivables often stem from inter-company loans, advances, payments made on behalf of affiliates, or unsettled transactions.
While they can reflect strategic cooperation within the group - particularly if tied to profitable ventures - such a sharp rise warrants closer scrutiny.
However, since Stanbic Holdings’ half-year financials don’t specify what goes to the bank, not all these amounts may be to the bank.
We reached Stanbic for comment but Kenneth Agutamba, the bank’s communications manager, said: “The incoming chief executive will remain in his current role at Absa until end of February 2025 and assume his new role in March. During this period, we prefer not to discuss his agenda.”
But if the receivables are short-term and non-interest-bearing, they could be part of routine operational activities. However, if they carry interest or are long-term, they could provide additional income, which is a positive.
The primary concern arises if the amounts grow disproportionately, become overdue, or signify undue reliance on the parent company.
Such a scenario could strain liquidity.
The increase in amounts due - up from Shs330b in December 2023 - poses questions regarding their nature, repayment conditions, and oversight. Unexplained or unexplored growth in the balances could unsettle investors.
However, Stanbic Holdings’ overall liquidity position remains stable, supported by strong cash reserves and a rise in retained earnings from Shs1.6 trillion in June 2023 to Shs1.8 trillion.
Despite the stability, it is crucial for Mumba to address the rise in group receivables to sustain investor confidence and ensure operational efficiency.
Stanbic remains Uganda's largest bank by assets and profitability. Photo / File
Stock market sentiment
Investor sentiment surrounding the Monday appointment has been broadly positive, despite concerns over the protracted search period.
“For a bank of this calibre, replacing a key management role understandably takes time,” said a seasoned financial markets consultant, who spoke on condition of anonymity.
Stanbic is no stranger to success. It has delivered two consecutive dividends and improved results over the past year.
“Mumba is a proven operator, coming from another top-tier bank with over 20 years of experience. It’s no wonder the stock market is buzzing with excitement,” he said.
The stock market counters indicate that Stanbic’s counter price remained stable at Shs44.79 since the notice appointment was published and remains one of the most sought-after stocks due to its robust asset base, consistent profitability, and a friendly dividend policy.
The share price has risen from Shs32 in January to Shs44.79 - with highs of Shs52 and lows of Shs31 - along the way, a rollercoaster that still points firmly upward.
“The dividends are a big draw,” the financial markets consultant said, noting that: “Last year, shareholders pocketed Shs5.47 per share. This year, an interim dividend of Shs2.73 in November suggests the final payout could surpass last year’s. Mumba is inheriting a healthy operation. the real test will be maintaining the momentum.”
Efforts to reach Mumba for a comment were unsuccessful.
However, insights from Stanbic Holdings’ chief executive officer Francis Karuhanga, shared during release of the half-year results in August, outline focus on enhancing client experience, leaning heavily on digital innovations such as Flexipay and self-service channels to cut operational costs, boost efficiency, and drive financial inclusion.
For now, shareholders seem to be banking on the bank and Mumba’s ability to steer it to even greater heights.
“Central to sustaining our growth aspirations, is improving our client experience. We continued to invest in digitising our services to improve our customers experience, improve our efficiency and reduce our costs to serve,” Karuhanga said in August. Flexipay now has 900,000 users.
Stanbic Holdings expects Mumba to deliver growth through tailored solutions and transparent pricing.
With Uganda’s economy projected to expand and borrowing likely to rise as interest rates decline, Mumba could capitalise on these tailwinds to further grow the loan book and sharpen the bank’s competitive edge.
Karuhanga had during the August shareholder briefing noted that Stanbic Bank’s lending rates will, as a priority, remain among the lowest in the banking sector.
Risks and opportunities
Mumba arrives at a time when costs continue to grow, which calls for a delicate balancing act.
Stanbic Bank’s commitment to reduce costs while enhancing service quality requires careful resource allocation to avoid eroding margins or compromising key deliverables such as innovation and customer satisfaction.
The promise of industry-leading low lending rates adds yet more pressure.
Competing on price means Mumba must navigate razor-thin margins, particularly as external factors such as inflation, currency fluctuations, and global economic turbulence loom large.
High expectations come with inheriting a top-performing institution.
Mumba has about 30 years of post-qualification experience, 20 of which have been in the banking sector, mostly in senior leadership roles covering business development, risk management, strategy formulation and finance strategy in three African markets including Botswana, Zambia, and for the last five years – Uganda.
However, Mumba is challenged by the fact that he must sustain the momentum built by his predecessor, balancing ambitious goals with the operational realities of a rapidly changing market.
Additionally, group dynamics and liquidity management could prove tricky, because a notable increase in “amounts due from group companies” suggests potential financial interdependencies within the holding, which if not managed prudently, could strain Stanbic Bank’s balance sheet.
For Mumba, the stakes are high, but so are the rewards. A growing economy, rising demand for credit, and a tech-savvy customer base offer ample room to innovate and grow.
The challenge will be turning these opportunities into sustainable success while navigating the stormy waters of a competitive banking landscape.
With shareholders counting their dividends and the stock price on a winning streak, the pressure is on.
His challenge? To keep the bank climbing without tripping on its success.
