BUSINESS

Leaked secrets of how Europeans rushed to buy Crane Bank as takeover backfires

Pundits argue that Crane Bank shareholders should have been given more time to find alternative recapitalisation.

Dfcu Bank is once again in the spotlight over the manner in which it acquired Crane Bank in what financial analysts believe is a part of an orchestrated scheme by several European countries to buy off the bank and tap into its profits and those of local investors who mostly acquired loans from it at low interests.

Former Crane Bank shareholders led by majority shareholder Sudhir Ruparelia and family, have vowed to drag Bank of Uganda (BoU) to court, claiming their bank was sold to dfcu without considering their interests in accordance with the Financial Institutions Act.

BoU has consistently defended the takeover of the bank, saying it was undercapitalized.

However, analysts claim the foreign ownership of dfcu and the “hurried way” in which they acquired Crane Bank indicates that it was a secret plan coordinated by European directors with the help of local officials. Crane Bank was an indigenous financial institution which had grown to become number three in the Ugandan market.

DFCU is partly owned by the Commonwealth Development Corporation (CDC), a British government-owned company, together with Rabo Development from the Netherlands and NorFinance from Norway, who are shareholders in Arise B.V together with Norfund, a Norwegian government-owned Private Equity firm and FMO, the Dutch Development Bank.

Shareholding percentages

Arise BV 58.71%

CDC Group of the United Kingdom 9.97%

National Social Security Fund (Uganda) 7.69%

Kimberlite Frontier Africa Naster Fund 6.15%

2 undisclosed Institutional Investors 3.22%

SSB-Conrad N. Hilton Foundation 0.98%

Vanderbilt University 0.87%

Blakeney Management 0.63%

Bank of Uganda Staff Retirement Benefits Scheme 0.59%

Retail investors 11.19%

Earlier, lawyers poked holes in the agreement between Bank of Uganda and dfcu Bank, saying some of the terms under which Crane Bank was bought by dfcu are questionable and could be legally challenged.

Veteran journalist Andrew Mwenda said Bank of Uganda acted in the most rush way in its resolution of Crane Bank issues, which makes it suspicious.

“First when it claimed Crane Bank was in distress, it should have given Sudhir time to find an investor to inject new capital into the bank. Many banks were actually in negotiations with Crane to buy it,” says Mr Mwenda.

“BOU hamstrung Crane Bank by stopping it from doing any new business like issuing new loans, overdrafts, bid bonds, performance guarantees, letters or credit etc. Crane was a bank for the business community. Stopping it from doing anything for three months was a disaster. It forced its customers who could not get a service to pull their money and business out of Crane to other banks and thereby transformed a capital adequacy problem into a liquidity crisis,” he adds.

One of the reasons for the BoU takeover of Crane Bank was that it was undercapitalized with the net assets at the point of liquidation negative to the tune of Shs300b. The Central Bank argued that the bank had client obligations of Shs700b and the continued running of the bank as costing billions of shillings in losses monthly, which was further eroding the company’s value.

Journalist Andrew Mwenda is asking questions.

However, Mr Mwenda says there were other institutions interested in buying the Shs550 billion worth of bad loans but BOU refuted this suggestion and instead sold all the good and bad assets to dfcu at only Shs175 billion.

“Let us remember that BoU claimed that Crane Bank was insolvent, riddled with many bad loans and over statement of its actual financial position. So they sold its assets for Shs175 billion only. What the news of DFCU profits for the first six months of taking over Crane Bank reveals is that BOU was either extremely incompetent and/or grossly misunderstood Crane Bank’s actual financial position. Or maybe there was fraud. What we now know is that BOU sold very good assets at basement bargain prices. Why?” he added.

The January 25, 2017 sale agreement signed by BoU Governor Tumusiime Mutebile and Mr Juma Kisaame, the managing director of dfcu, indicate that Crane Bank Ltd was sold to DFCU Bank by Bank of Uganda (BoU) at a paltry Shs200 billion without consulting the shareholders who valued it at Shs1.3 trillion.

dfcu managing director Juma Kisaame is said to have signed a rush agreement to take over Crane Bank

The shareholders also accuse BoU of undervaluing Crane Bank’s assets at Shs10 billion at the time of takeover despite DFCU Bank later valuing them at Shs47 billion.

“The agreement does not itemise the list of assets acquired (save for the leases). This is very strange given that CBL’s total assets were worth Shs1.3 trillion at the time of BoU’s takeover of the Bank, but the listed leases in the agreement were given an undervalued book value of only Shs10 billion by BoU’s accountants, PWC,” a stakeholders’ protest document seen by this website reads in part.

Dr Sudhir Rupaleria has challenged the sale of his bank.

The shareholders of Crane Bank included Sudhir Ruparelia (28.83%), Ms Jyotsna Ruparelia (13.8%), their children Ms Sheena Ruparelia, Ms Meera Ruparelia and Mr Rajiv Ruparelia (1.99%), White Sapphire (47%), Jitendra Sanghani (4%) and Kampala businessman, Tom Mugenga (0.003%

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