Crane Bank denies rumours of sale, says in merger talks with “strategic equity investor”

Crane Bank headquarters in Kampala. Photo: Edgar Batte/Uganda Business News

Crane Bank was Thursday forced to deny rumours that it is up for sale, saying instead that it is merging with a “strategic equity investor.”

A report circulating on social media and first published in the tabloid press said the bank, Uganda’s fourth largest by assets, “has seen over 70% of its shares transferred and/or sold to South African investors.” The sale, according to the report, was due to the bank’s poor performance.

But a press statement signed by the bank’s chairman, Joseph Biribonwa, says it is a “strong and sound financial institution.” It says the bank decided to bring on other shareholders five years ago.

“Five years ago, the shareholders and the board decided to diversify and at that time the proposal that became public prematurely was the Initial Public Offer (IPO) route,” the statement says. “That was a thought process as the branches spread and expansion took root.”

Instead, the statement says the bank decided to get a “strategic equity investor preferably with a regional and even better continental network” two years ago.

“This strategy is in sync with the inevitable trend of mergers and acquisitions, not just as an important forum of growth for the purposes of the East African integration but as a strategic move at a global level too.

“The strategic equity investor approach is aimed at strengthening the bank’s balance sheet further,” the statement says.

The bank put off an initial public offering on the Uganda Securities Exchange two years ago. In explaining the decision, its board chairman told Daily Monitor that the plan was under review.

Claims about the bank’s poor performance are not without merit, however. Crane Bank had the worst performance of Uganda’s 25 commercial banks in 2015, registering total losses of Shs3.31 billion – the first time it was registering a loss in 10 years. By contrast, it made a Shs50.64 billion profit in 2014. This was despite increasing revenue to Shs145.15 billion from Shs139.16 billion in 2014.

The loss, according to the bank’s financial report, was due to an increase in its loan loss provision to Shs50.35 billion in 2015 from Shs11.22 billion the previous year. Operating expenses also rose to Shs92.95 billion from Shs69.33 billion in 2014.

The bank, which is classified as a domestic systemically important bank (D-SIB) by the central bank (together with Stanbic Bank and Standard Chartered Bank), was responsible for 20% of total non performing loans (NPL) in the banking sector in 2015. According to Bank of Uganda’s Annual Supervision Report for 2015, “asset quality [of all commercial banks] deteriorated with the ratio of non-performing loans (NPLs) to total gross loans rising from 4.1% to 5.3% between December 2014 and December 2015.”

The report adds that there “was a decline in asset quality among D-SIBS with NPL ratio rising from 3.5 percent in December 2014 to 7.6 percent in December 2015. While this reflected the general performance of the banking sector, the decline in quality among DSIBs was also on account of the performance of one bank with a significant exposure to one borrower. All the DSIBs have adequate capital to absorb losses.”

Still, Crane Bank grew its assets in 2015 to Shs1, 794.34 billion from Shs1, 719.81 billion the previous year, making it the fourth biggest bank in the country. It however ceded third place to Centenary Bank in 2015.

Uganda Business News made efforts to get a comment from the bank’s Head of Operations, Peter Opio, about the merger talks but this was not received by the time we published.

However, a bank official, who spoke on condition of anonymity, said the bank is in talks with a “sub-Saharan African premier banking financier already on the move in Africa. You will only know the name when all necessary regulatory approvals are in place.”