By Moses Kaketo
Stanbic bank registered outstanding performance in 2014, thanks to their effective restructuring and leadership change strategy.
The bank’s net profit rose to Ugx. 1.3 trillion from Ugx. 1.01 trillion reported in 2013. Customer deposits reached an all-time high of Ugx.2.1 trillion up from Ugx.1.7 trillion the previous financial year. Loans and advances to customers also grew to reach Ugx. 1.6 trillion compared to Ugx. 1.4 in 2013. This is phenomenal growth.
This stellar performance helped Stanbic reclaim her position as the country’s top bank after posting great results in key areas of – revenue, deposits, asset base, branch network and dealership. Other banks that had a good year are Diamond Trust Bank, Standard Chartered and Centenary.
Standard Chartered, the bank that has consistently featured among the top two, saw her assets grow from Ugx. 2.4 trillion to Ugx. 2.6 trillion in 2014, thanks to their effective positioning and optimization of consumer and business banking with special focus on salary loans and SMEs. The bank’s customer deposits grew to Ugx. 1.8 trillion from Ugx. 1.7 trillion in 2013. Loans and advances to customers hit Ugx. 1.4 trillion from Ugx. 1.2 trillion in 2013. The bank earned net profit of Ugx. 1.4 trillion up from Ugx. 1.2 trillion the previous financial year.
Crane bank assets increased from Ugx. 1.4 trillion to Ugx. 1.7 trillion in 2014. Customer deposits increased from 1.o62 trillion to 1.2 trillion in 2014. Loans and advances to customers increased from 655 billion to 844 billion. Net profit increased marginally from 47.2 billion to 47.5 billion in 2014.
The Stanbic adjustments:
The year 2013 saw several changes at Stanbic. Several restricting initiatives were undertaken following changes in leadership that saw Japheth Katto, join as the bank’s board chair and the one of a kind CEO, Patrick Mweheire, rise to the bank’s driving seat. We gather its these internal changes that are doing some wonders and making Stanbic’s counter at the #USE gain traction as the most active and worth the pennies.
Restructuring and capacity building:
People run the business and mindset change is one of the top single effective interventions in business. It is not surprising that when change of guard happened, the first task on the agent was to reorganize the house that was somewhat running messy — customer service was gradually declining. A human resource rationalization exercise was immediately done, and staff identified as incompetent or those who could not clearly articulate their value addition were asked to move-on, replaced with experienced and more aggressive staff. It is said that more than 30 branch managers whose branches were underperforming were asked to give-way.
The new team was given targets on issues of customer service – and a new performance measurement tool – the balanced score card (BSC) introduced. For the uninitiated, the BSC focuses on four key areas of business performance that is FLIC – financial focus, learning & growth, internal business process (or innovation) and customer focus. The managers have to show what they have done on the above areas, at each of the bank’s strategic business unit – branches and key departments like marketing, treasury and audit, to mention a few.
The talent pool in Uganda is limited. You can imagine how some rival banks suffered as Stanbic extended her hand to attract some of the industry’s best apples. This came at a high transfer price. It is not surprising that Stanbic’s employee expenses increased from Ugx 104 billion to 119 billion despite restructuring that took place in 2014 – the severance pay and high salaries of new hires explain this hike. However, it is expected to remain high as it is expensive to retain good people. The bank is said to be investing more in customer training and compliance. This increased investment in capacity building is producing results.
Sources say that Barclays bank corporate branch on Kampala road, arguably her most profitable operation, lost eight staff.
Customer recovery process:
One of the key complaints about Stanbic has been rigidity in processes, long queues and slow transaction processing. The bank is said to have experienced high churn rates between 2011 to 2013, due to what was referred as high transaction charges against poor services.
In response, Stanbic has focused on the people – doing more capacity building and motivation for staff. When it comes to marketing, the ‘new’ team is more keyed up and aggressive and customer focused. One of the areas the bank has been doing great – corporate banking – has been given new focus (as Patrick was in that area) and now effort to compete head-on with Stanchart in the SMEs banking is underway. The recruitment drive for a special team for project “Unseat Goliath in the SMEs segment” is in high gear and 2015 will be exciting for the banking industry.
With promise for better services, best products in the market and aggressiveness, the team has been able to recover a good number of lost customers’ especially salaried clients including, ones like this: ‘‘I had closed my account two years ago. But Stanbic bank staff kept contacting me via calls and SMS asking me to reopen my account with promise of better service and better products. Mid last year, I reopened the account. The service is now better than before, and I am grateful.’’ To make their point, Stanbic bank has started special unit to cater for Chinese traders with more responsive products and services. Considering the increase trade between Uganda and China especially for the small and medium clients, this is clear message of their intention to attract SMEs.
Flat rates:
Stanbic was losing customers partly because of what was said to be ‘abnormal’ charges. For example they would charge you each time you deposited money. If you deposited three times a day, you would be charged three times. At the same time, they would charge you each time you withdrew money. Not anymore. Today Stanbic has a range of products for customers to choose from including Karibu Salary account where account holders are charged a flat fee –this has won back salary earners.
Stanbic’s research into the success of their main nemesis – Standard Charted – indicated that SMEs and Salaried accounts are major reasons for their successes. The advantage with salaried employees is they are educated people with an address and some face to save. They are likely to pay, even when they change jobs – and therefore represent a low risk profile to the bank with over 99% debt collection rate! Stanbic’s strategy to attract salaried people is deliberate to get the bank back to the people.
The bank has also won back some corporate companies who had partially left them. Many of these where keeping more money with rival banks and less with Stanbic. The cost of switching a bank in Uganda is low considering that most corporate companies don’t keep their money in one bank. They spread it out, but tend to keep more with particular bank, that they find more responsive and less bureaucratic. In the past, Standard chartered had taken the day. So, small changes in customer services, brings results instantly.
No wonder customer deposits increased from Ugx. 1.7 trillion to Ugx. 2.1 trillion in 2014. Net fees and commission income increased from Ugx. 98 billion Ugx. 108 billion in 2014.
More cost cutting:
The ability to keep operating costs below the belt is critical to the success of financial institutions. While Stanbic Bank boasted of being the largest bank, it was struggling with high opex (operating costs) which were eating into their profits.
For example, cost to income ratio hit an all-time high of 67% in 2010, and has been going the wrong way since 2011 at 47.2% to 40% in 2012. With more than 1,800 staff, Stanbic employed more people than any other bank in Uganda. Was it necessary to keep all these staff? Were they making any meaningful contribution?
Early 2014, with assistance from the regional office, the bank embarked on department by department restructuring process by removing positions that were more administrative and less productive. The first staff to be affected were those in the banking department. More than 100 staff where affected in a single reshuffle.
With experienced and aggressive Patrick Mweheire at the helm of Stanbic alongside a competent team and marketing guru, Brian Mukisa, improved customer service, better market products and enriched customer service, Stanbic Bank shareholders should only expect more in 2015.
The closure of some offices in Kampala was a consolidation act to make the bank more agile and focused. Let’s see how they keep the momentum in 2015.
About the author:
Moses Kaketo works with Summit Business Review Magazine, holds a Master’s Degree in Business Administration from Uganda Management Institute, A professional diploma in marketing (CIM) and bachelor’s degree in Education. He sees business in everything. He loves writing business news, reviews and analyses.