MUMBA KALIFUNGWA: Absa Bank Uganda’s 2022 performance manifests our obsession with our customers’ and stakeholders’ growth This is a condensed version of a speech made by Absa Bank Uganda Managing Director, at the release of the bank’s 2022 financial results. He said the bank’s results are not just a reflection of the growth at Absa, but also the growth of the bank’s customers and its entire stakeholder value chain. He reaffirms that the bank is well-capitalised, financially stable, solid and growing. He also reiterates the bank’s strategic prioritisation of improving customer and digital experience, delivering, and protecting returns, developing our people, and ensuring a sustainable control environment.

For many of us, 2022 seemed like the year we had been hoping for. We were going to put the pandemic behind us and find some sort of return to normalcy. 

Unfortunately, if the past two to three years have taught us anything, it is that we must be highly adaptable to volatility and uncertainty.

According to data from the Ministry of Finance, the Ugandan economy grew by 4.7% in 2022, while both the Purchase Managers Index (PMI) and Business Tendency Index remained above the 50-mark threshold signalling optimism and improvement in economic conditions.

On the supply side, services and industry were the main drivers of economic growth. There was also a strong recovery in wholesale and retail trade, real estate, and education, with industry rebounding through construction and manufacturing.

On the demand side, private investment and private consumption headed toward pre-COVID levels. The current account deficit widened to over 9% of GDP, primarily reflecting a deterioration in the terms of trade and a wider trade deficit. 

In the financial markets, the 2022 Absa Africa Financial Markets Index produced by the Official Monetary and Financial Institutions Forum (OMFIF) indicates that Uganda’s overall score showed improvement with gains being realized in the following:

1. Market transparency, tax, and regulatory environment largely due to an improvement in ESG initiatives and standards after the Bank of Uganda launched a strategic five-year plan from 2022-27 which focuses on the financial system’s sustainability and climatic risk.
2. Legal standards and enforceability partly due to the existence of legal provisions for the enforceability of collateral and netting-off. Uganda recently partnered with both the European Union and Frontclear BV to support interbank transactions and further use of standard master agreements, which would bolster its score.
3. (iii)Access to foreign exchange: Uganda’s score increased mainly due to an improvement in foreign exchange interbank liquidity. The score for FX reserves adequacy also rose.

Unfortunately, we were also faced with increased inflationary pressures as a result of higher energy prices which slowed down growth in real consumption, reduced purchasing power and limited credit growth as a result of reduced credit demand.

We all felt the pinch which did not spare individuals or business enterprises.

As Absa Uganda, powered by our drive to bring possibilities to life, we remained steadfast in our commitment to support our customers even through these tough times.

As firm believers in the shared value philosophy, our financial performance reflects not just growth at Absa, but the growth of our customers and all those within our value chain.

Financial Performance Overview

I am pleased to report that 2022 was a year of growth for Absa across key parameters. 

Our revenue grew by UGX46 billion from 2021 driven by sustained customer and business recovery to near pre-COVID levels. We remained profitable, closing the year with a profit after tax of UGX141 billion, reflecting a growth of 28.9% from the previous year and delivering a positive return for our shareholders. This leap in profitability anchors our position as a leading banking partner in this market.

We are pleased to report a significant drop in impairment of 94%, owing to an improvement in the construct of our loan book. This achievement is one of which we are collectively proud because it reflects our efforts to help customers regain and improve their ability to meet their credit obligations. Through sustained customer engagement and providing the necessary business and financial advisory, we were able to support our customers’ businesses, most of which were in distress, to recover from the lockdown impact.

Our net customer loans grew by 19.8% as a result of our commitment to meeting our customers’ credit needs. We continue to support our individual, SME and commercial customers in their personal and business endeavours.

Unpacking the business performance & Striving to be our customers’ primary banking partner

Despite our economy showing great resilience in the face of a global economic downturn, financial conditions continued to tighten significantly throughout the course of the year as high inflation and commodity prices eroded household and business incomes. Our focus throughout the year was, therefore, how to support our customers navigate these tough times.

We refreshed our business strategy and continue to adapt to be more responsive to customer needs, putting our customers at the centre of everything we do. I am pleased to report that our scorecard reflects positive gains in efforts to optimise customer experience, drive greater efficiency in our processes and provide diverse and market-responsive solutions and products. I would like to appreciate our customers who continue to choose us as their banking partner.

Furthermore, our balance sheet growth reflects the return on our sustained investment in digital and alternate channels in alignment with our strategy to improve our customer experience and enhance our digital experience.

We believe in the power of digital to deliver seamless banking experiences to our customers meeting their needs at their convenience and additionally driving even greater efficiency in our processes.

While we have already realised significant progress, this will remain a priority for us as we seek to accelerate our digital transformation.

Aligning our business strategy to the economy’s growth trajectory

We supported the economy’s growth trajectory, financing key sectors including agriculture, trade, construction, real estate, and manufacturing.

Our total lending to the agriculture sector stood at UGX158 billion, reflecting a growth of 40% from 2021, trade at UGX306 billion growing by 25% from 2021 and manufacturing at UGX196 billion growing by 14% from the previous year.

A 12% increase in total equity denotes our ability to finance economic expansion across all strategic sectors. We are very well-capitalised, financially stable, solid and growing.

A winning, talented and diverse team

Our people are our strength and drive our competitive advantage enabling us to better serve and show up for our customers daily. Our business strategy is to invest in the growth of our people as a key enabler for business growth.

Over the past years, we have embarked on deliberate efforts to strengthen our employee value proposition ensuring we attract and retain top talent, supported by various internal colleague initiatives and programs.

Our metrics reflect that our efforts are paying off, as indicated by growth in our employee net promoter score as we build a workplace where people can continue to thrive and grow.

Our progress is also being recognized externally. And most recently Absa Bank Uganda was recognised as having the Best Practices in Workplace Culture & Environment: in the recently released Prudential HR Practices Survey for 2022.

• 86% staff retention for 2022
• 92% retention of our top talent
• 93.2% of employees recommend Absa Uganda as a great place to work
• 24,864 hours of training provided to colleagues in 2022.
• 60% of colleagues are enabled to work from home, a policy that also promotes green commuting thus reducing carbon emissions

An active force for good through sustainable initiatives

As a bank, we are cognisant of the large array of societal challenges facing us including economic development, job creation, quality education and the impact of climate change.

Our commitment to being a force for good and sustainability journey that we have embarked on, is driven by the philosophy to create shared value in the communities where we operate.

By conserving natural resources and driving diversity, financial inclusion, education and skills development, and enterprise development, the Bank contributes to the societies and natural environment in which it operates.

We contributed to skilling the youth through our ReadytoWork programme which provides training courses that cover essential work, entrepreneurial, money and work skills. This programme increases youth employability and supports job creation.

Through strategic partnerships, we supported SME growth leveraging our pool of resources to provide viable businesses with the support they require to grow sustainably.

These are some examples of the impact created by our sustainability initiatives:

• 5,814 external beneficiaries through our skills and development programmes (ReadytoWork and Financial Literacy)
• 30% reduction in waste generation – segregation at source to allow for reuse, recycling, and landfill options, as well as digital migration of most operations leading to a reduction in paper waste generation. 
• 8% Energy Saving – achieved through re-sizing of equipment according to load demand. 
• Over UGX 142 billion was extended to support local content initiatives in the country in the areas of waste management, construction, and transportation.
• UGX 87.8 billion – Total Tax paid by Absa Bank Uganda in 2022
• To help increase the uptake of insurance in Uganda, we partnered with Prudential Uganda to launch the Absa Family Protection Plan – a life insurance policy designed to help families plan for their financial needs faced during the loss of a loved one.
• Over UGX 131 million worth of IT equipment has been committed to the Uganda Police Training School resource centre at Kabalye, Masindi.
• UGX 60 million was donated to the Uganda Red Cross Society (URCS) to purchase relief items to support families displaced by flash floods in Eastern Uganda. URCS awarded Absa Uganda with the *Humanitarian Award* for the Bank’s exceptional contribution to this cause.
• Through the Absa Women’s Network Forum (WNF) our colleagues embarked on a journey to skill over 500 teenage mothers and women from the Central, West Nile and Albertine regions of the country in financial literacy and personal development skills for employment and business creation. The ladies also handed over 20 laptops to Wakisa Ministries and TERREWODE to enable beneficiaries at the centres to sign up for and benefit from the bank’s “ReadytoWork” programme

Outlook and Prospects for 2023

Over the near and medium term, we project that economic growth will be supported by developments in the oil sector and a rebound in agricultural output on improved weather conditions. We are already seeing a reduction in inflation which signals better days ahead.

We anticipate GDP growth of above 5%, supported by declining inflation, appreciation of the shilling against the dollar and continued economic recovery of businesses.

Going into 2023, our strategic priorities remain centred around improving customer and digital experience, delivering, and protecting returns, developing our people, and ensuring a sustainable control environment. Our focus is on executing against these priorities at pace, and we are making progress on each of them.

The financial sector continues to become even more competitive with the constant evolution of the landscape within which we operate. We will define our value offering with a focus on delivering personalised experiences to our customers, taking the time to understand their needs and through innovation, developing tailored banking solutions that match their growth ambitions.

Financial inclusion remains low in our market, and we have taken it upon ourselves to become a more agile organization serving customers beyond the realm of traditional banking. We continue to seek opportunities for collaboration to develop solutions that provide for last-mile banking. 

We are already well on our way to leveraging the power of strategic partnerships with various players including fintechs to give us the flexibility to make banking services more accessible to the underbanked population. We are driven by intention and purpose to be a force for good, embedding ESG as a priority within our strategy. 

We intend to continue making a difference in the areas of education and skills development, inclusive financing, promoting a just society and environmental sustainability.

We intend to put sustainability at the centre of everything we do to deliver shared value within our community. It’s in our DNA to connect our strategy with opportunities to drive growth and deliver shared value for our customers and communities.