By Andrew Irumba
Bank of Uganda and dfcu Bank are both currently caught between a rock and a hard place, because the former is already paying for the latter’s mistakes.
When Bank of Uganda dissolved and closed Crane Bank in 2016 and later sold it to dfcu Bank, the quick sale raised eyebrows, because of the manner in which it was conducted.
Shortly after selling Crane Bank, BoU also sold all the properties that the bank was leasing from Meera Investments across the country, which housed its branches.
Meanwhile BoU had dragged Sudhir to court on behalf of Crane Bank, seeking to recover over Shs397, which he had allegedly pocketed from Crane bank before BoU sold it to dfcu bank.
But last week the High Court Commercial Division Justice David Wagutusi dismissed BoU’s case against Sudhir and ruled that Crane bank closure was illegal and that Crane bank (under receivership) had no capacity to file the case.
Where Does dfcu Bank Come In
Although the BoU legal team contends that they are going to appeal the High Court ruling, whether they win the appeal or not, their transactions with dfcu bank consequently illegal.
The Status Quo currently is that dfcu bank is illegally occupying Crane Bank Assets and its branches all over the country.
According to Justice Wangutusi’s ruling, if Bank of Uganda’s actions of closing Crane bank were wrong and illegal, it consequently means that even their actions of selling Crane Bank and its assets to dfcu Bank are/were illegal, because according to law experts an ‘Illegality cannot breed a Illegality.’
Business analysts contend that BoU’s saga over Crane bank and the lost case with tycoon Sudhir is already affecting dfcu Bank.
As you read this, insiders contend that dfcu revenues are already bleeding, whereby although previously they were taking Uganda’s market by storm, the bank is facing a worse revenue picture in the first six months of the year ended June 30. This situation, industry experts attribute to a massive exodus of former Crane Bank customers and the current customer mistrust.
Many clients fear for the future of their finances in case Sudhir wakes up one day and decides to throw dfcu bank out of Crane Bank’s properties and assets.
Besides that, dfcu bank was recently hit by a huge fraud that involved loss of billions of customers’ money, hence it is unable to push up revenue for the second year running and gross earnings seem to be headed for the worst growth record in two years at the end of this year.
That force dfcu bank into another sharp drop in profits and a difficult position to recover.
Financial figures released last month indicate that although dfcu had previously recorded continuous growth in profits prior to acquisition of Crane Bank assets, they are currently at a 14.4% drop in net profit to Shs35.6bn for the first six months of 2019 due to a sharp reduction in borrowings, lower recoveries and increased operating expenses.
Experts reveal that during the first year of Crane Bank takeover in 2017, dfcu recorded a Shs114Bn in net profit for the half year, up from Shs23bn in 2016, which was a major leap.
However, current figures show that loans and advances took a nasal dive from Shs42Bn in 2018 to Shs1.36bn in 2019, which is quite alarming .
Insiders also reveal that revenue weakness continues to come from interest earnings, yet this is the main revenue line of the bank.
Besides that, customers’ deposits dived from Shs2.0Bn to Shs1.99Bn during the period under review, while dfcu’s net operating income grew marginally from Shs146Bn to Shs148.5Bn and operating expenses increased by 3% to Shs99.1Bn.
However, this is the second time dfcu is suffering a sharp drop in profits following last years 52% decline in net profit to Shs61.7Bn.
Partly, this has been attributed to decline in earnings from investment in government securities and huge expenditures in legal battles. And partly to the current woes involving Bank of Uganda, Crane Bank and Sudhir.
It should be noted that Sudhir dragged BoU and dfcu Bank to court, contesting BoU’s sale of over 40 properties beloning to Meera Investments.
In the suit, Sudhir wants court to declare BoU’s sale of Meera Investments properties and tranfer of title of ownership from Meera Investments to dfcu bank declared null, void and illegal.
This presents a warning signal that slowing profit may soon swing to the other side of a drop if the revenue weakness persists.
But the situation will worsen when Sudhir starts demanding for Meera Investments properties and other Crane Bank assets that were fraudulently sold to dfcu bank by BoU.
