[2008-08-08]  Long term investors to benefit from stock
Long term investors in Stanbic Bank, a listed company at the Uganda Securities Exchange, stand a chance of yielding better returns from their savings, based on the firms’ good performance this year.

Long term investors are investors who buy and hold shares of listed companies for a period between 3 and 5 years. The analysis has been issued by Renaissance Capital, an Investment Advisor and Brokerage firm in its latest equity research, following the release of the Stanbic Bank Uganda (SBU)’s half year results as of June 2008.

Stanbic’s net profits surged to Shs33b in the six months from Shs24b during the same period last year, according to its unaudited financial statement released on Tuesday, this week. Stanbic’s profit rose on the back of increased net interest income accruing from loans amounting to Shs570 billion, from Shs358 in June last year.

“Our forecast shows that they will grow almost 17 percent at year end from financial year 2007 figures,” the analysis reads in part. Shareholders return on investment has also been forecast to hit an all time high of 52.4 percent, “the highest on the local bourse.”

Renaissance welcomed the aggression of Stanbic through which it has rolled out more new branches and products, in a market that is under attack from a huge wave West African and Kenyan banks.

In less than a year, the banking sector in Uganda has witnessed the entry of United Bank for Africa, and Kenya Commercial Bank, which are already operating, while Equity Bank, Fina Bank, and Global Trust Bank have also said that their operations are due to start this year. The advisory firm noted that Stanbic was moving toward the right direction to sustain its strong performance within such a threatening environment by being continuously aggressive and more innovative.

“This is possibly the only way to survive in the face of increased competition and consolidation of banks in particular markets,” Renaissance said, adding that customer service and product innovation will define the axis of performance in banking.

“The challenge to banks will be their capability to train and retain quality staff, as competition for expertise is rising with local banks feeling the greatest pinch.”

Commenting on the future of interest rates in Uganda, Renaissance said, increased competitions among these banks, which have shot to 17, will drop and in effect pinch the operating profits, in the long run. Most bank’s Interest rates now range between, 16 and 25 per annum following a minimal reduction, from previous years.
Source: © 2008 Monitor Publications Ltd