[2008-05-20]  Shareholders Give Stanbic Bank Leeway to Borrow
Stanbic Bank company directors now have the powers to borrow money of up to 50 per cent of the total share holder's equity after shareholders passed a resolution empowering them to do so.

At the bank's Annual General Meeting on May 15, shareholders passed a resolution amending article 83 of the company's Article of Association to allow board of directors borrow money without further shareholder's approval.


The outgoing Stanbic Bank Chairman Martin Aliker said: "There is stiff competition in the banking sector, the company therefore wants to raise money to expand its operations." He said the move will help the company to raise more capital. "If you don't raise money through banking, you will remain stunted while others grow," he added.

The banking industry has recently become competitive following the entry of five more banks in the Ugandan Market. Bank of Uganda last year licensed Kenya Commercial Bank, United Bank of Africa, Continental Bank, and Housing finance to start commercial banking.

Stanbic Bank's intended borrowing is seen as a move to consolidate its position as a market leader in the increasingly competitive banking industry.

Before the resolution, the company would not borrow beyond its share capital Shs5.18 billion as at the end of December 2007.

But now the bank can borrow up to 50 per cent of Shs122. 5 billion shareholders equity through bonds, debentures and other securities whether outright or as security for any debt.

Ms Gertrude Karugaba, the company secretary of Stanbic Bank said it too legal advice and moments of explanations from different directors to have the shareholders pass the resolution.

Most shareholders expressed fear of whether the directors will not misuse their money and that it exposes their money.

Dr Aliker however assured shareholders that the board will use their money carefully and that it will be for the benefit of both shareholders and the company.

Under the new article, the directors may exercise all the powers of the company to borrow money and to mortgage or change its undertaking, property, and uncalled capital.

Such a move, according to experts in stock markets, makes a lot of sense to the company and has both long term and short impact on both the company and the shareholder.

According to Mr Martin Lukwago, head of Research and Trading, Renaissance Capital, the move would help the company to expand while making more profits and improving its performance at the stock exchange.

But he clarified that performance at the Uganda Stock Exchange is dependent on the sentiments of the investor and not how much a company invests.

He added that if the company operations are expanded in terms of building investor confidence, the company share price will go up while the return on equity would also increase.

During the meeting, Dr Aliker announced his stepping down as Chairman of Stanbic, after serving in the same capacity for some good years.



Source: Copyright © 2008 The Monitor.