29 January 2017

Uganda: Crane Bank Acquisition - What Next for Dfcu?

Photo: Colleb Mugume/Daily Monitor
Former Crane Bank Ntinda branch has now been rebranded to dfcu.

Kampala — dfcu Bank managed to pull-off the second largest bank acquisition in Uganda since Standard Bank of South Africa bought Uganda Commercial Bank (UCB), now Stanbic Bank, in 2000.

dfcu was on Friday confirmed to have acquired the entire stake in what was Uganda's fourth largest bank by assets, Crane Bank.

With assets of about Shs1.8 trillion by end of 2015, Crane Bank was targeting to become Uganda's largest bank in the next five years.

On the other hand, dfcu was placed as the sixth largest bank in Uganda with assets of about Shs1.6 trillion by end of June 2016.

In essence, dfcu with that acquisition may have created Uganda's second largest bank with assets of about Shs3.5 trillion. Only Stanbic Bank Uganda has more assets.

Through its liquid shareholders, Rabobank of the Netherlands and Norfinance of Norway, dfcu was able to pull this off after in excess of about $40m was provided by both parties.

Our sources reveal that Bank of Uganda (BoU) zeroed down on dfcu after fending off competition from about 13 other financial institutions.

The Sunday Monitor did report back in December last year that four of those 13 financial institutions had expressed interest. By the second week of January 2017, dfcu had submitted a bid and it was considered to be the best.

"We were looking for many things, the financial status of this acquirer; we looked at who was behind this acquirer. Are they able to put in the capital? Do they have strong shareholders?

We were looking for shareholders of reputable character and dfcu emerged the winner," Ms Justine Bagyenda, the executive director of research at BoU, says.

Crane Bank became significantly attractive to dfcu after BoU stepped in and started a process of cleaning the bank of non-performing loans (NPLs) and any governance issues.

It is understood that during the negotiations, more toxic assets had been ring-fenced to ensure that dfcu inherits a clean bank.

On January 25, the dfcu board approved the transaction to acquire the assets and liabilities of Crane Bank for an undisclosed fee.

However, more importantly, was the commitment - in writing - that there will be additional equity investment in the bank.

"Further supplemental actions to give effect to this integration will continue to be implemented by both the bank and company, including additional equity injection by the company into the bank," a statement issued by the dfcu board of directors reads.

For more than a month, Crane Bank (under BoU management) had secured the services of Knight Frank, a property valuation and management company to start the process of accepting bids to sell properties of defaulting Crane Bank customers.

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