Government recently announced recapitalization of PostBank after the latter recorded a 19% increase in net profit for the year ended December 31, 2022.
The announcement was made by the Minister of State for Investment and Privatization, Evelyn Anite after the bank held its annual general meeting.
“PostBank is confident that it will achieve its minimum capital requirement of 150 billion by June 2024. What I am trying to emphasize here is that we have committed as government to give PostBank more money. We resolved that the dividends that they declared to us this afternoon, they recapitalize it and we also did resolve that we are going to get for them additional money such that their share capital of 150 [billion set by Bank of Uganda] is achieved. So that is what we resolved and we are very happy that government was able to take this bold step of making sure that the bank is not underfunded and it meets its financial obligations,” Anite said.
PostBank which is owned by the Government of Uganda with 100% shareholding reported a net profit of 15.1 billion shillings up from the 12.2 billion shillings net profit posted in 2021.
The Bank’s total assets grew by 21.3% from 745 billion in 2021 to 946. 6 billion in 2022.
The Bank’s total income also increased from 144.5 billion in 2021 to 159.2 billion in 2022, which the Bank attributed to the its digital transformation journey that began in 2020.
“In addition to the four branches [we opened up], we rolled out smart ATMs, and those ATMs are very functional. You can deposit money, you can withdraw money. There are also cardless transactions you can undertake. You don’t need a card. You can use your phone as well as the touchscreen to transact at the ATM,” said the Bank’s Board Chairman, Andrew Owiny.
The Bank’s Managing Director, Julius Kakeeto said, “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.”
The Bank’s shareholders’ equity increased to 135.6 billion in 2022 from 117 billion in 2021.
Asked what challenges the bank is facing, and whether the taxpayers’ money is safe, Kakeeto said the Bank does not have enough capital.
“We don’t have enough capital because the regulation, the laws have changed. We need to increase our capital to help us be competitive and even better.”
Kakeeto also said that the bank is suffering the challenge of defaulting which is felt across the entire banking sector.
“There is a challenge that is faced by the industry, which is high default rate. And that creates a lot of other challenges in the industry, including the interest rates. The general default rate in Uganda is always between 4 to 5%. So, on average, every 100 shillings that you give out, 4% or 5% will not return. So it’s a very big challenge,” he said.
Asked what remedies the bank has put in place to curb the vice, Kakeeto said, “it’s our job to support customers either through a lot of financial literacy, a lot of information, creating awareness and monitoring and follow up to make sure that the ones we lend money can actually pay.”
Kakeeto also deried the cost of appraising customers which he said is high.
Meanwhile, the Managing Director revealed that the digital transformation embarked on by the bank in 2020 has paid off significantly, by almost eliminating physical transactions in the banking halls.
“One of the things we have done is around digitalizing the bank. Three years ago, 90% of our transactions used to be in the banking halls, and only 10% was on digital channels. If you look at last year, it is the other way around. 60% of our transactions are on channels; agents, internet, the phone, ATMs and only 40% of our customers were coming to the banking halls. As I speak today in quarter one, only 15% of our transactions are happening in the banking halls. The other 85% is self service channels. The whole idea is that want to improve the customer experience so that you can actually enjoy our services wherever you are, you don’t have to come physically to the bank,” said Kakeeto.