23 November 2006
interview
Stanbic Bank is proposing to float 20 per cent of its shares to the public through an Initial Public Offering (IPO) from tomorrow Friday November 24 to December 22 and subsequently to be listed on the Uganda Securities Exchange (USE) later in January next year. The bank's Managing Director, Mr Kithili Mbathi spoke to Daily Monitor's Peter Nyanzi about the new development.
Tell us why Stanbic is making this bold move now?
In 2002 Stanbic bought a majority shareholding in Uganda Commercial Bank (UCB) and the two banks merged.
At the time of the acquisition, part of the agreement was that at a point in the future the government would sell its 10 per cent shareholding and the Standard Bank Group would also sell 10 per cent of its shares, which would be listed on the Uganda Securities Exchange (USE).
So we have been in discussions with the government and this was deemed to be the appropriate time. So we will be listing 20 per cent on the USE. It is going to be the largest issue on the USE. The target is to have the largest number of shareholders ever to subscribe into an IPO in Uganda.
The shares will be sold at Shs70 each and the total IPO is expected to raise about Shs70 billion. The terms will be a minimum application of 1,000 shares and multiples of a thousand thereafter.
It is our intention to ensure that we get as many Ugandans as possible - both Stanbic customers and non-customers - to become shareholders in Stanbic.
There are several companies that have floated their shares on the stock market, why would one be particularly interested in being a shareholder in Stanbic Bank?
Stanbic has performed very well over the past few years and the prospects of growth in the future are very good as well. Anybody wishing to take advantage of this growth and seeking to be a partner to the fortunes of Stanbic would definitely be interested in being a shareholder.
Stanbic has a countrywide network of branches - unequaled by any other bank in Uganda. Besides the savings accounts, current accounts and personal loans, there are also other products such as mortgages; vehicle and asset finance that we have in the pipeline, which we believe, will meet more of the banking needs of our customers.
So what would one gain really from buying shares in Stanbic?
Investors gain in two ways from buying shares. Firstly, they actually become shareholders in the company, so they share the fortunes of the company. Fortunes can go up when business is good or they can go down when it is not so good.
When business is good, typically a company would declare a dividend based on the profitability of the previous year. So, people who are going to invest in Stanbic right now will be able to take advantage of the performance of the bank in 2006. So, although they will be registered as shareholders sometime in January next year, they will be eligible to take advantage of the dividend when it is declared later in May.
That is a direct benefit that they will get. Secondly, if a company's performance is good, then the shares are in high demand on the USE and the price of the share goes up.
What is the likely earning per share for those who will invest in Stanbic?
Stanbic Bank has been profitable over the years and in the six months up to June our profit was Shs18 billion. The projection for this year is Shs39 billion which is a good performance.
So what does one have to do in order to apply for shares?
One just has to any Stanbic Bank branch or any major stock broker from Friday November 24 and pick up an application form and a prospectus that will give one all the details. It is a very straightforward process.
There were press reports that your IPO was delayed by a so called hitch? How was that?
No, no, I do not think that was a correct report. Our target was to launch the IPO this week and we have received the regulatory approvals both from the USE and Capital Markets Authority and the IPO will be opening tomorrow and closing on December 22.
What does this IPO mean for the stock market in the country generally?
We think that the market capitalisation will virtually double. By this I mean the value of all the shares of all companies, which are listed on the USE on the market, will double.
This will be good because it will show investors that the market is more vibrant. There will be more shares to invest in and it will obviously stimulate more companies to come on the stock market and eventually develop a more lively USE.
As a person who is familiar with stock markets on the continent, what is your assessment of the stock market industry in Uganda?
I think this is what one would call an emerging stock market. It has been able to attract five local companies and three regional companies, which have really boosted it.
But I think Stanbic will be a real milestone in the development of this Stock Exchange because this is going to be the largest IPO ever to come on the market.
If and when the Stanbic IPO is successful, people will be able to see that it is possible to raise substantial amounts of money through the USE.
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