Last week, Bank of Uganda allowed Dfcu bank to take over the troubled Crane bank, after a competitive bidding process.
Dfcu says that out of the combined total of 90 branches, it will maintain 66. On Tuesday Dfcu officials, led by managing director JUMA KISAAME, addressed a press conference in Kampala, where they laid out their vision. Ali Twaha transcribed the proceedings and below are excerpts.
(Daily Monitor) What does Dfcu’s acquisition of Crane bank mean for you?
We are aware that this was a very competitive process. Emerging as a successful bidder in this trans- action is testament to the Central bank’s confidence in Dfcu bank as a final resolution to BOU intervention in the former Crane bank. We take pride in our contribution in fostering the stability and integrity of the financial services sector in Uganda.
This acquisition gives us the impetus to achieve our strategic objectives of building a robust retail operation with multiple delivery channels while consolidating our position as a key player in the SME [small and medium enterprises] segment.
With strong and committed shareholders, a larger balance sheet, wider customer base and a combined team of experienced and professional staff, Dfcu is well-positioned to offer innovative and competitive financial solutions to our customers while guaranteeing a reasonable return on investment.
(Bukedde) Some areas had both Dfcu bank and Crane bank branches. How are you going to handle that?
We have started integration of the combined business to optimize service delivery. This integration will entail rationalization of the combined branch network resulting in a larger footprint of 66 branches and over 100 ATMs [automated teller machines]. Given the scale and the system of the integration, there could be inevitable [disruptions] in our service delivery sys- tem which will quickly be resolved.
(The Observer) How long will the process of integrating about 500,000 Crane bank accounts onto your system take?
In terms of doubling our balance sheet, we have been preparing ourselves for growth. We have a strategic intention to growth and we have been pursuing this strategy. We are confident that this opportunity has come at the right time when we are well positioned in terms of capital to handle the acquisition.
I want to assure the public that Dfcu will handle the integration. As I speak right now, we have been able to transfer all the customers’ accounts onto the Dfcu platform and operations are still ongoing since yesterday [Monday]. So, this is all a sign of readiness. We are very confident we made the right decision and we will deliver on our promise to the market and ensure financial stability.
(The Observer) Where does this acquisition leave Crane bank Rwanda?
This is an issue which is with the central bank of Rwanda. The central bank of Uganda has informed them of this transaction. This is being handled between the two central banks. At the moment I can’t give more information other than that.
(New Vision) There is a rumor that some of these Crane bank properties are not registered in names of Crane bank limited. So, how many branches have you actually acquired?
In terms of how many branches we have taken over, we now hold a combined number of 66 branches which we have rationalized. So, as we speak, if you move around the country, you will find that 66 branches are under Dfcu bank.
Some of the branches of Crane bank [and Dfcu bank] were in a common location [and] we merged them. As of now, we will have 66 branches which are running. In terms of the assets which we acquired, what Dfcu bank took over are the as- sets in the names of Crane Bank Limited.
(The Observer) Can you give us some of the details of this transaction, such as the value?
We are not at liberty to give details of the transaction. This is something that Bank of Uganda is in a better position to talk about. But I would like to say that there is a commercial transaction that we have agreed with the central bank.
We believe there is value for us and also the central bank as we were negotiating this. This was a competitive process; there were more than 13 bidders. So, it’s not that Dfcu was singled out. There were omissions of bidding and complying with all those conditions to make the merger successful. I want to request that at the opportune time the central bank will be able to give you the specifics of this transition.
(The Observer) What is your planned strategy in the next five years as you complete the takeover of Crane bank?
We have a five-year strategy which was approved by the board and this is to grow a strong retail operation with multiple delivery channels and strong focus on the SME sector.
So, there was a strategic feed with what we wanted to do and what Crane bank was doing in many respects. So, for us, this is an opportunity to kind of accelerate our strategic direction.
And we believe that if we can internalize this and integrate it well, we should be able to get value for both our customers as well as the shareholders. So, this acquisition only complements that strategy.
(The Observer) This acquisition is likely to eat into your core capital. What strategy is there to have shareholders inject more capital in the bank?
The bank is sufficiently capitalized for purposes of this transaction. The bank’s shareholder, Dfcu Limited (listed at Uganda Securities Exchange), has got a number of very supportive shareholders. They are very supportive of the strategy. But for purposes of this transaction we are in a good position.
(Daily Monitor) What does this transaction mean for the holding company going forward? Were minority share-holders informed of this?
There are things we can say on behalf of the bank and others we can’t say on behalf of the holding company. We only speak for Dfcu Bank Limited and it’s not the listed company, (but) they are regulated by Bank of Uganda.
Dfcu Limited (regulated by a separate regulator) is the holding company; that also explains how much we can say here. But the holding company mobilized the funds for this transaction.
(Daily Monitor) How are you going to deal with some of the toxic assets that you acquired from Crane bank?
Bank of Uganda carried out a process to ascertain the magnitude of the non- performing loans to make sure that they are very well provisioned for, because there is no point in having toxic assets from one bank to another…So all the assets we take on and their specific classification are well provisioned and they will not cause any problems.
That is a requirement of the Financial Institutions Act (FIA), and Bank of Uganda was in charge; so, they have to fulfill their obligations, so we do not worry about toxic assets.
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