Social media message on Crane Bank inaccurate, says BoU (Updated)

Updated: “Guys, if you know anyone with money in Crane Bank, tell them to remove it… Within the next week,” the message circulating on WhatsApp on Thursday morning said. It was signed: “Insider BoU.” (BoU stands for Bank of Uganda.)

Bank of Uganda has denied the message, however. A statement released by the central bank today says it did not issue the warning.

“It has been brought to our attention that messages have been circulating on WhatsApp instructing depositors to withdraw their money from Crane Bank within the next week,” the statement says. “We wish to categorically state that these messages were not issued by Bank of Uganda.”

Crane Bank has been in the news lately for what started as rumour that 70% of its shares had been sold to a South African bank. The bank put out a statement, signed by its chairman, saying the claim was false, but that it was seeking to merge with a “strategic equity investor.” The statement did not say what investors the bank was in talks with.

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

The bank is reported to be in a precarious financial position due to large non-performing loans on its books, hence the search for an investor to offer more capital. 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.

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.

The East African newspaper reported recently that ex-Barclays ceo, Bob Diamond, has agreed in principle with the bank’s shareholders to acquire a strategic stake. Diamond is the founder of Atlas Mara, a financial services group that aims to build a banking empire in sub-Saharan Africa.

Atlas Mara and Crane Bank representatives however disagree on the bank’s valuation, according to the East African, which has stalled negotiations. The report says Atlas Mara values the bank at $250 million while its owners think it is worth $300 million.

Bank of Uganda’s statement hints on the negotiations. “The shareholders of commercial banks have the option of selling shares to new investors as they deem appropriate,” it says. “However, any new investor in a commercial bank must satisfy the regulator that they are fit and proper. The BoU does not comment on any negotiations to sell shares in a bank while these negotiations are ongoing.”

While the central bank’s stand on negotiations is understandable, Crane Bank’s communication during the process leaves a lot to be desired. Save for the initial statement on merger talks – itself a reaction to a tabloid report – it has kept quiet as the press and public speculated on what was happening. Even reports that it had sent out letters to its top 500 borrowers asking them pay back their loans were not worrisome enough for the bank to respond.

With no coordinated and reassuring official response forthcoming, customers and the public have relied on conjecture to assess the bank’s current grounding. The result has been panicked social media messages, and even more panicked customers.

On Saturday, 15 October Crane Bank issued a statement on the WhatsApp message, Bank of Uganda’s response to the message, and reactions to the developments on social media.