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What do we know about Opportunity Bank, Uganda’s latest commercial bank, which you probably did not know?

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Although it is the 25th bank to enter the commercial banking space, OBUL will hit the ground running as Uganda’s 23rd biggest bank by assets, 20th by lending and 17th by profitability- going by 2018 results. - UBC Photo

Opportunity Bank Uganda Limited (OBUL) on 25th September 2019 was awarded a Commercial Banking license by Bank of Uganda, becoming Uganda’s 25th Commercial Bank.

This follows a lengthy vetting process after the bank applied for a license on January 28th, 2019.

“Bank of Uganda hereby grants Opportunity Bank Limited approval for a Commercial Bank License (class 1); to transform from a Credit Institution to a Commercial Bank,” wrote Kenneth Egesa, the Acting Executive Director, Supervision at Bank of Uganda.

As the 25th bank, OBUL, enters a top-heavy and tightly competitive banking industry, largely dominated by the top 5 commercial banks.

At end of 2018, Opportunity posted UGX132 billion in assets, UGX 90.5 billion in lending and UGX65.5 billion in deposits.

The five biggest banks- by assets market share, as at the end of 2018 are: Stanbic Bank (19.1%), Centenary Bank (11.3%), Standard Chartered Bank (10.4%), dfcu Bank (10.3%) and Barclays Bank (9.9%). They control UGX17.2 trillion or 61% of the UGX28.2 trillion industry assets as at end of December 2018.

The big 5 also controlled 61% of the UGX19.6 trillion industry deposits and as such also dominated 62% of the UGX12.7 trillion industry lending. The 5 biggest commercial banks also raked in UGX561.3 billion in profit- 75% of total industry profit in 2018. Stanbic Bank, single-handedly accounted for 28.7% of total industry profit.

Regardless, OBUL can count on its 24-year experience in Uganda, having started out in 1995 as Faulu Uganda owned by Food for the Hungry International (FHI). In 2006 Opportunity Transformation Inc (OTI) a US-based micro-lending non-profit organization acquired 63% and led the business to acquire a Tier 2 Financial Institutions license from Bank of Uganda to operate as a regulated Credit Institution. With the license, OBUL effectively became a Savings & Loan Organisation that not only offered micro loans, savings and insurance products but could also now collect deposits.

Tineyi Mawocha Emmanuel a seasoned banker, who has been at the helm of the bank, since October 2016.

In 2015, OTI increased their stake in the business to 92%. A year later, in 2016, MyBucks SA a fintech company listed on the Frankfurt Stock Exchange acquired 49% in the business, becoming the majority shareholder. 

With the new shareholders, the bank was reorganised, bringing in new management. Tineyi Mawocha Emmanuel a seasoned banker, was brought in, in October 2016 from Urwego Opportunity Bank in Rwanda, where he had worked for two and half years. Before that, he worked as CEO of Standard Bank Swaziland for 7 years.

Geriga Christopher who had been Head of Risk, was promoted to Executive Director.

The bank’s board is headed by Phillip Karugaba, a famous acquisitions, capital markets, infrastructure and energy lawyer as well as Head of ENS Africa Advocates.

At end of 2018, Opportunity posted UGX132 billion in assets, UGX 90.5 billion in lending and UGX65.5 billion in deposits.

Thanks to the reorganisation and an infusion of fresh leadership and capital OBUL has been on a growth path.

Over the last five years, customer deposits have more than tripled- growing by 226% from UGX20.1 billion in 2014 to UGX65.5 billion as at end of December 2018- a compounded annual growth rate of 22%. Supported by deposits growth, over the same period, customer lending has grown by 170%, from UGX33.5billion to UGX90.5billion. 

As such, OBUL’s asset base has more than doubled from UGX66billion to UGX132 billion (CAGR 15%).               

The letter from Bank of Uganda accompanying the banking license

Boosted by lending income, OBUL’s total income has also grown by 74% from UGX20.7 billion to UGX36 billion. As a result, OBUL has been consistently profitable for the last 5 years. Net profit has grown more than six fold- by 464% from UGX786.6 billion in 2014 to UGX4.4 billion in 2018- a compounded annual growth rate of 41%.

OBUL to hit the ground running

Although it is the 25th bank to enter the commercial banking space, OBUL comes to the playing field with quite solid foundation to start with. Thanks to its 24-year experience on the ground, OBUL will enter the market as Uganda’s 23rd biggest bank by assets, 20th by lending and 17th by profitability- going by 2018 results.

At UGX90.5billion in lending in 2018, OBUL’s loan portfolio is larger than that of 5 commercial banks i.e. (UGX85.8 billion), Guaranty Trust Bank (UGX72.3billion), Cairo International Bank (54.8billion), United Bank for Africa (33 billion) and ABC Capital Bank (19.6billion).

Geriga Christopher, previously the Head of Risk, was in January 2016 promoted to become the Executive Director.

With an asset base of UGX132 billion, OBUL is bigger than Cairo International Bank and ABC Capital Bank who at the end of 2018 had UGX124.8 billion and UGX61.7 billion in assets respectively. 

As at end of 2018, OBUL was more profitable than 8 commercial banks, 5 of which were loss making. The 8 banks are: Bank of India (UGX4.1 billion), Commercial Bank of Africa (UGX600 million), ABC Capital (UGX300 million), Cairo International Bank (UGX3.5 billion loss), NC Bank (UGX4 billion loss), Tropical Bank (UGX5.8 billion loss), Guaranty Trust Bank (UGX10.1 billion loss) and Exim Bank (UGX16 billion loss).

OBUL also has a wide country network consisting of 20 branches and 2 service centres spread all over the four regions of Uganda, with 68% of the branches in rural towns.   

City lawyer, Phillip Karugaba, heads Opportunity Bank’s board of directors.

In June 2018, the bank rebranded adopting a more vibrant look and feel.

OBUL also joins other banks like Equity Bank and Finance Trust that were initially credit institutions but went on to become banks and are doing quite well for their age.

Present day Equity Bank Uganda was first Uganda Microfinance Limited (UML) before acquisition by the Equity Group and is today, Uganda’s 8th largest bank by assets and profits.

Finance Trust Bank which started out as a women-owned microfinance, obtained a commercial banking license in 2013 and is today the 13th most profitable bank.

However, Global Trust Bank which in 2008 acquired, Commercial Micro-finance Limited (CMF) hit a dead-end in July 2014 and was wound up by the central bank over alleged insolvency.

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Ugandan travellers to China to enjoy better services with Orient Bank’s partnership with China’s UnionPay

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Mr. Tashin Morjaria (L), Orient Bank Head of Business Development and Mr. Michael Nsereko (R ) Orient Bank Head of e-banking join Mr. Shuan Ghaidan (C), UnionPay International Company Leader and Director of Products at the partnership launch at UnionPay Headquarters in Shanghai.

Orient Bank Uganda Limited and UnionPay International have announced a partnership in which all UnionPay Cards are now accepted at all ATMs and POS terminals of Orient Bank, one of the leading and fastest growing banks in Uganda.

Annoucing the partnership in Kampala today, Darshana Bhatia, Orient Bank Excutive Director said, “This is yet another demonstration of our commitment to anticipate and meet our customer needs through technology, innovation  and partnership. Uganda  and China enjoy a robust trading relationship which relies greatly on each country’s intergration into the global financial system if ease of doing business is to be attained.”

UnionPay International is accelerating the promotion of digitized payments in East Africa. Today, UnionPay has over 80% acceptance on ATMs in Uganda and over 85% acceptance on POS terminals.

Mr. Luping Zhang, General Manager of UnionPay International Africa Branch said, “This partnership will offer holders of UnionPay cards a seamless payment experiece. Based on this collaboration, the two sides will explore future cooperation in rolling out UnionPay’s innovative products, including UnionPay QR Code payment and B2B online payment.”

Orient Bank has continued its quest to provide fast, convenient and safe payment systems to serve its niche customers in SME and High Networth Banking Segments.

This partnership will further boost trade between Uganda and China as visitors from China will be able to process payments at Orient bank ATMs and Point of Sale terminals across various merchants .

In partnership with more than 2,000 institutions worldwide, UnionPay has enabled card acceptance in 176 countries and regions, and realised card issuance in 58 countries and regions. UnionPay provides high quality, cost effective and secure cross-border payment services to the world’s largest cardholder base and ensures convenient local services to a growing number of global UnionPay cardholders and millions of merchants.

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FINANCIAL DILEMMA: BoU needs fresh UGX 671bn in capital- Auditor General

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Bank of Uganda (BoU) is undercapitalised to a tune of UGX671.712Billion According to the Auditor General, John Muwanga this poses a risk to the Central Bank’s operations.

Auditor General, John Muwanga says this financial position poses a risk to the Central Bank’s operations

The details of the Central Bank’s woes are contained in the 2018/2019 audit report of Bank of Uganda which carries queries that were raised by the Auditor General’s team.

The audit report highlighted that as per the Bank of Uganda Act, Section 14 (3), the issued and paid up capital of the Bank shall be a minimum of UGX 2 Trillion but as of June 30, 2019, the core capital of the Bank was below the minimum required capital by UGX671.712Billion while in the same period in 2018, the Central Bank was undercapitalized to a tune of UGX482.730Billion.

The audit report further explains that the operating losses of the Bank during the year ended June 30, 2019 were mainly attributable to interest expense paid to financial institutions on deposit auctions and vertical repos issued by the Bank in the management of monetary policy as per the Bank’s mandate and currency costs of UGX 198.274Bn which is equivalent to 89 % of the interest income) yet in 2018 the loss was recorded at UGX 155Bn representing 79% of the interest income.

The Central Bank management has explained that the costs of implementation of monetary policy that have caused erosion of the Bank’s core capital are currently fully borne by the Bank.

“I considered this to be a key audit matter because inadequate capital poses a business risk to the Bank and its operations. I performed the following audit procedures in this area, among others,”Muwanga cautioned.

The Central Bank also reported that during the period between July 2018 to June 2019, the Non-Executive Directors were each paid UGX.5Million net of tax per month as retainer fees and UGX2.5million net of tax per meeting as their sitting allowance.

The Central Bank’s board comprises of Prof. Emmanuel Tumusiime-Mutebile who doubles as Board Chairman and Governor, Dr. Louis Kasekende, James Kahoza, William Kalema, Judy Obitre Gama, Keith Muhakanizi and Josephine Okui Ossiya.

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Stanbic September report bullish about economy; demand grows backed by credit growth

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The Stanbic Purchase Manager’s Index (PMI) for September shows that the private sector activity remained in the growth territory at the end of the third quarter of 2019.

The survey, sponsored by Stanbic Bank and produced by IHS Markit, indicates that ability of firms to secure additional customers resulted in higher new orders and a subsequent expansion of business activity. Meanwhile, both input costs and output prices continued to increase.

Benoni Okwenji, Stanbic Bank’s Fixed Income Manager

The headline PMI was 55.7 in September, down from 57.5 in August, but still above the 50.0 no-change mark.

Stanbic Bank Fixed Income manager Benoni Okwenje, stated that the Private sector activity remained solid at the end of the third quarter of 2019. Despite the PMI declining to 55.7 in September from 57.5 in August, overall activity remains robust.

“Domestic demand continues to improve, partially driven by private sector credit growth over the last year. Despite higher input costs, the rise in new orders has supported overall output. It has now been 32 months in a row of improving business conditions and we suspect this trend will carry through for the rest of the year,” said Okwenje.

The report shows that new orders increased in September, with a number of panelists indicating that they had been able to secure new customers during the month.

The survey, which has been conducted since June 2016 and covers the agriculture, industry, construction, wholesale & retail and service sectors, contains the latest analysis of data collected from the monthly survey of business conditions in the Ugandan private sector.

According to the PMI report for September, the expansion in demand, alongside successful marketing, led to a thirty-second successive monthly rise in business activity. All five broad sectors saw growth of output.

 “Purchasing activity continued to rise, extending the current sequence of expansion to 19 months. Faster suppliers’ delivery times meant that the increase in input buying fed through to an accumulation of inventories. Overall input prices increased, with panelists reporting higher costs for electricity and purchased items including cement, food products and stationery,” Okwenje added.

Companies responded to higher input costs by raising their output prices accordingly. Selling prices have increased throughout the 40-month survey so far.

The PMI report further states that the likelihood of continued new order growth and business expansion plans led to optimism among firms that output will rise over the coming year. “Over 74% of panelists were confident regarding the outlook,” the report showed in part.

About PMI

The PMI is a composite index, calculated as a weighted average of five individual sub-components: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%) and Stocks of Purchases (10%). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.

The headline figure derived from the survey is the Purchasing Managers’ Index™ (PMI™) which provides an early indication of operating conditions in Uganda.

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