Annual Report 2016
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TABLE OF CONTENTS LIST OF ACRONYMS 4 FINANCIAL DEFINITIONS 5 BANK CONTACT INFORMATION 6 CHAIRMAN BOARD OF DIRECTORS’ STATEMENT 11 MANAGING DIRECTOR’S STATEMENT 14 STATEMENT OF CORPORATE GOVERNANCE 18 RISK MANAGEMENT AND CONTROL 28 SUSTAINABILITY REPORTING STATEMENT 34 FINANCIAL REVIEW 49 AUDITED FINANCIAL STATEMENTS Directors’ Report 56 Directors’ Responsibility for Financial Reporting 58 Report of Independent Auditors 59 Statement of Comprehensive Income 61 Statement of Financial Position 62 Statement of Changes in Equity 63 Statement of Cash flow 64 Notes to the Financial Statements 65 BANK AND ATM NETWORK 127 CENTENARY BANK l Annual Report & Financial Statements 2016 3 LIST OF ACRONYMS aBi Finance Agriculture Business Initiative Finance Limited aBi Trust Agriculture Business Initiative Trust ACF Agricultural Credit Facility AGM Annual General Meeting ALCO Asset and Liability Committee ATM Automated Teller Machines BCP Business Continuity Plan BCM Business Continuity Management BCMT Business Continuity Management Team BOD Board of Directors BOU Bank of Uganda CBS Core Banking System CSI Corporate Social Investment CSR Corporate Social Responsibility EaR Earnings at Risk EIB EAC MF Loan European Investment Bank East African Community Microfinance Loan EIB PEFF European Investment Bank Private Enterprise Finance Facility EIR Effective Interest Rate ERM Enterprise Risk Management FAMOS Female and Male Operated Small enterprises HR Human Resource HRD Human Resource Division IAS International Accounting Standards ICT Information and Communication Technology IFRS International Financial Reporting Standards ILO Intenational Labour Organisation KCCA Kampala Capital City Authority LPO Local Purchase Order MOGLSD Ministry of Gender, Labour and Social Development NIM Net Interest Margin NSSF National Social Security Fund NPAT Net Profit After Tax OSH Occupational Safety and Health P.A.Y.E Pay As You Earn QMM Quarterly Management Meeting REPO Repurchase agreement loan ROA Return on Assets ROE Return on Equity RSA Interest Rate Sensitive Assets RSL Interest Rate Sensitive Liabilities SIDI Solidarite’ Internationale pour le Development et l’ investissement SOCI Statement of Comprehensive Income SOFP Statement of Financial Position To T Trainer of Trainers UECCC Uganda Energy Credit Capitalization Company URA Uganda Revenue Authority w.e.f With effect from WENRECO West Nile Rural Electrification Company 4 CENTENARY BANK l Annual Report & Financial Statements 2016 FINANCIAL DEFINITIONS Core capital Permanent equity in the form of issued and fully paid-up shares plus all disclosed reserves less goodwill or any intangible assets Cost-to-income ratio (%) Total operating expenses as a percentage of total income Credit impairment charge (Shs) The amount by which the period profits are reduced to cater for the effect of non-performing loans for the period Credit loss impairment [Statement of The amount by which gross loans in the SOFP are written down to cater for Financial Position (SOFP)] (Shs) non-performing loans Credit loss ratio (%) Provision for credit losses per the Statement of Comprehensive Income as a percentage of average net loans Dividend cover (times) Earnings Per Share divided by ordinary dividend per share Dividend per share ( Shs) Total ordinary dividends declared per share with respect to the year Earnings per share (cents) Earnings attributable to ordinary shareholders divided by the weighted average number of ordinary shares Effective tax rate (%) The income tax charge as a percentage of income before tax excluding income from associates Lending Ratio Net loans and advances divided by total deposits Net interest margin (%) Net interest income as a percentage of average earning assets Non-performing loans [NPL] (Shs) Loans whose servicing is due but the borrower has no money on the account from which to recover the installment(s) Percentage change in credit loss ratio (%) Ratio of change in the rate of credit loss impairment between time periods Percentage change in the impairment Ratio of change in the rate of impairment charge between time periods charge (%) Profit for the year (Shs) Annual profit attributable to ordinary shareholders and preference shareholders Return on Assets (%) Earnings as a percentage of average total assets Return on Equity (%) Earnings as a percentage of average equity SOFP credit impairment as a % Ratio of SOFP credit impairment to gross loans and advances of gross loans and advances (%) Supplementary capital General provisions which are held against future and current unidentified losses that are freely available to meet losses which subsequently materialize, and re- valuation reserves on banking premises, and any other form of capital as may be determined from time to time. Total capital The sum of core capital and supplementary capital Total capital adequacy Total capital divided by the sum of total risk weighted assets and total risk weighted contingent claims CENTENARY BANK l Annual Report & Financial Statements 2016 5 BANK CONTACT INFORMATION 1. Principal place of business and registered office Mapeera House Plot 44-46, Kampala Road P. O. Box 1892, Kampala. Tel: +256 414-251276/7 Toll-free line: 0800 200 555 Fax: +256 414-251273/4 E-mail: [email protected] Website: http://www.centenarybank.co.ug 2. Company Secretary Peninnah Tibagwa Kasule Mapeera House Plot 44-46, Kampala Road P. O. Box 1892, Kampala. 3. Correspondent Banks • Citibank NA New York - US • Deutsche Bank AG - Germany • Deutsche Bank Trust Company – USA • Bank of China • Ivory Bank - South Sudan • Sparkase Aachen Bank - UK 4. Auditors Ernst & Young Certified Public Accountants Ernst & Young House Plot 18, Clement Hill Road Shimoni Office Village P. O. Box 7215, Kampala. Uganda. 6 CENTENARY BANK l Annual Report & Financial Statements 2016 VISION MISSION AND OWNERSHIP We are in a race, and to stay well ahead of the rest, we constantly evolve to compete effectively in the digital era. CENTENARY BANK l Annual Report & Financial Statements 2016 7 OUR VISION “To be the best provider of Financial Services, especially Microfinance.” OUR MISSION STATEMENT “To provide appropriate financial services especially microfinance to all people, particularly in rural areas, in a sustainable manner and in accordance with the law.” OUR VALUES SUPERIOR INTEGRITY TEAMWORK EXCELLENCE CUSTOMER SERVICE LEADERSHIP PROFESSIONALISM COMPETENCE 8 CENTENARY BANK l Annual Report & Financial Statements 2016 SHAREHOLDERS • The Catholic Dioceses, which are all independent legal personalities incorporated as Registered Trusteeships, are: Arua, Fort Portal, Gulu, Hoima, Jinja, Kabale, Kasana-Luwero, Lugazi, Kampala, Kasese, Kotido, Lira, Masaka, Mbarara, Mityana, Moroto, Nebbi, Soroti, and Tororo. • Registered Trustees of the Uganda Episcopal Conference. • SIDI - Solidarite’ Internationale pour le Development et l’Investissement (International Solidarity for Development and Investment) based in France, invests in developing countries through institutions to foster financial inclusion, social and economic development. • STICHTING HIVOS-TRIODOS FONDS. An investment fund, specializing in investing in mi- crofinance and trade finance, managed by Triodos Investment Management in the Netherlands. • Individual shareholders (4 individuals). OWNERSHIP The Registered Trustees of Various Catholic Dioceses in Uganda 38.5% The Registered Trustees of the Uganda Episcopal Conference 31.3% Solidarité Internationale pour le Développement et l’Investissement (International Solidarity for Development SIDI and Investment) 11.6% Stichting Hivos-Triodos Fonds 18.3% Individuals 0.3% To tal 100% CENTENARY BANK l Annual Report & Financial Statements 2016 9 We maintained our position as the leading commercial microfinance Bank and plan to reach more people with banking services through financial inclusion in 2017. Professor John Ddumba-Ssentamu Chairman Board of Directors Annual10 ReportCENTENARY & Financial BANKStatements l Annual l 2015 Report & Financial Statements 2016 CHAIRMAN’S STATEMENT I am pleased to present Centenary Bank’s annual report for the year ended 31st December 2016. Centenary Bank continued to register growth and good performance supported by a more stable macro environment, although to an extent the business environment was still affected by continuous drought, competition and changing trends in the banking environment. We maintained our position as the leading commercial microfinance Bank and plan to reach more people with banking services through financial inclusion in 2017. The Operating Environment At a macroeconomic level, 2016 was a better year than 2015. The annual headline inflation reduced to 5.7% from the re-based rate of 8.4% in 2015, where the main drivers were stable prices for fuel and utilities and less volatility in exchange rates. The above, coupled with the Central Bank’s objective of THE NUMBERS increasing private sector lending, led to the reduction of the central bank rate For the year under review from 17% in December 2015 to 12% as at 31st December 2016. This was aimed at increasing private sector credit which only grew by 3.7% due to other intervening factors such as increasing poor quality of loans, instability in the neighboring countries and overall volatility in the global economy. The average 14.1% prime lending rates in the industry slightly fell from 23% to 22%. 91 DAY TREASURY The Parliament of Uganda further adopted the Financial Institutions Bill 2015, BILL AVERAGE YIELD which introduced amendments to the Financial Institutions