Dfcu Bank limited has taken over Crane Bank, less than five months after the central bank took control of what used to be Uganda’s third largest banking institution.
Bank of Uganda governor Emmanuel Tumusiime-Mutebile told journalists in Kampala yesterday that the central bank has transferred all Crane Bank’s assets and liabilities to dfcu group adding that all customers and depositors of Crane Bank shall now have their accounts operated by dfcu Bank. Crane Bank was set up in 1995 by one of Uganda’s top businessmen Sudhir Ruparelia who had 48.67 percent of voting rights.
Mutebile said dfcu emerged winner out of 13 institutions that competed to take over of Crane Bank. He added that the sale was in exercise of the central bank’s powers as a receiver, under Sec 95(1)(b) of the Financial Intelligence Act.
“The Bank of Uganda has now transferred the liabilities including the deposits of Crane Bank to dfcu Bank limited and in consideration of that transfer of liabilities, Bank of Uganda has conveyed to dfcu Bank, Crane Bank assets. Bank of Uganda would like to congratulate dfcu Bank upon this significant milestone that will certainly make the bank’s footprint much wider. Bank of Uganda assures the public that it will continue to protect depositor’s interests and to maintain the stability of the financial sector” he said.
Mutebile however declined to divulge details of the deal.
“Some of these things are still being discussed. The important thing is now that we’ve agreed transfer identified assets and liabilities to dfcu Bank. There will remain after that a residual of Crane bank which we shall maintain and will eventually have to liquidate or wide up.”
Mutebile’s statement confirmed the mid-week social media rumours that announced the takeover. Bank of Uganda bullion vans were also seen packed at Crane Bank main brain on Thursday afternoon and evening. The unusual sight of heavily-armed military guarding the bullion vans led to social media speculation.
Ibrahim Kabanda, a board member of Bank of Uganda defended dfcu’s takeover of Crane Bank saying it is a very strong bank supported by big institutions in Europe citing the Commonwealth Development Corporation (CDC) and others.
Dfcu runs 47 branches across the country, some of which now include former branches of Crane Bank. Prior to its closure, Crane Bank had 46 branches across the country and an asset base of about Shs 1.79 trillion. dfcu Bank recorded profit before tax of Shs 46.92 billion in 2015 and total asset base of Shs 1.651 trillion in 2015.
The central bank took over Crane Bank in October, 2016 upon determination that it was significantly under-capitalized and posed systemic risks to the stability of the financial systems. Back then, Mutebile said that the continuation of Crane Bank activities in the current form was detrimental to the interests of its depositors.
Problems within Crane Bank were first detected at the end of September 2015 after regular examination indicated that there was significant under-capitalization of the bank.
This was also confirmed in the auditor’s report of 2015 indicating that the bank reported a consolidated pre-tax loss of over Shs 7 billion during the year as a result of an increase in expenses and losses on loans and advances. This was a contrast of its Shs 57 billion profits recorded in 2014.
The central bank governor explains that the problem was partially caused by a number of bad and doubtful loans that could have undermined the performance of the bank. He however adds that the management of the bank takes a share of the blame for the crisis.
Justine Bagyenda, the executive director for supervision explains that a bank is declared as significantly under-capitalized, when its level of capitalization is less than 50 percent of the statutory requirement of Shs 25 billion.