I&M Group East Africa region CEO Kihara Maina. PHOTO | DENNIS ONSONGO
I&M Group saw its stake in its Ugandan subsidiary fall to 79 percent in the year ended December 2023, despite investing an additional Sh961 million in the business, indicating that minority investors also chipped in to recapitalise the bank.
The Nairobi Securities Exchange-listed firm’s latest annual report shows the stake dropped from 90 percent the prior year.
The new investment by the Kenyan banking multinational in I&M Bank Uganda helped bring the subsidiary into compliance with the raised minimum capital requirements in the Uganda market.
The report shows the fresh investment added to the Sh821.29 million it had made in the subsidiary in the previous year.
The back-to-back capital injection has come on the back of the Bank of Uganda, the banking sector regulator, having raised the capital requirements for lenders operating in the market.
The regulator, in 2022, issued the Financial Institutions (Revision of Minimum Capital Requirements) Instrument 2022, requiring banks to have the minimum paid-up cash capital at USh120 billion (Sh4.2 billion) by December of the same year and increasing this to USh150 billion (Sh5.2 billion), by the end of June 2024.
The regulations also required banks to have closed last year with a minimum core capital of Sh4.2 billion and raise it to not less than Sh5.2 billion by the end of June this year.
The fresh injection helped raise the core capital of the Uganda unit to USh134.85 billion (Sh4.69 billion), making it compliant with the required minimum of Sh4.2 billion.
I&M Bank Uganda was in breach in the previous year when its core capital was at USh73.94 billion (Sh2.57 billion)—a position that forced it to submit a capital restoration plan to the regulator, in which it committed to accelerating recoveries of significant bad loans, organically grow capital reserves, and inject fresh capital.
I&M Group entered Uganda in April 2021 by acquiring a 90 percent stake in Orient Bank Uganda for Sh3.29 billion and rebranding it into I&M Bank Uganda.
The group followed up the Sh3.29 billion acquisition costs with a Sh995.85 million investment in 2021, before making a further Sh821.26 million injection in 2022.
The 2022 injection was made up of a direct additional investment of Sh538.89 million and a further Sh282.4 million through the conversion of preference shares in I&M Uganda into paid-up cash capital.
I&M Bank Uganda last year posted a decline in pre-tax profit to Sh0.4 million from Sh2.6 billion. The decline was blamed on increased provisioning for loan defaults, salary increments and expenses incurred on upgrading the core banking system and integrating the subsidiary into the group.
“In Uganda, our most recent investment, we aligned our staff proposition with the rest of the group, leading to higher staff costs. Overall, we continue to ensure staff compensation remains competitive within the group,” said the lender in the annual report.
I&M Group last week paid shareholders a dividend of Sh2.55 per share amounting to Sh4.22 billion on the performance for the year ended December 2023 in which net profit rose 12.7 percent to Sh12.62 billion.
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