Dfcu Group, the parent company of Dfcu Bank, posted a decline in half-year income and profits, which a statement alongside its unaudited financials said had “normalised following the integration of the acquired net assets of Crane Bank Limited”.
The Uganda Securities Exchange-listed company said income was down 42.7% in the first six months of 2018 at Shs146bn, compared with the same period a year before. Last year, income came in at Shs255bn after rising 204.3% from the previous period in 2016.
The income boost in 2017 came from Dfcu’s good deal on Crane Bank when it booked a Shs121.8bn gain (later revised to Shs119.3bn) through negative goodwill on the acquisition – which was recorded under income.
On buying the troubled lender last January, Dfcu gained Shs270.7bn of assets (revised to Shs268.2bn) and owed Bank of Uganda Shs148.9bn for the bank to be paid in installments; the difference between the two resulted in a gain for Dfcu.
That gain is missing from this year’s half-year income statement, which shows that income declined by Shs108.9bn. Instead, it’s been moved over to the company’s balance sheet and was amortised – its value reduced and the reduction recognised as an expense – and a charge of Shs12bn recorded under operating expenses.
Dfcu attributes the 5.5% rise in operating expenses to Shs96.4bn in the six months to the amortisation charge as well as investments in digital infrastructure.
The company’s after-tax profits reduced by 63.5% to Shs41.6bn, reflecting the fall in income and rise in operating expenses. Profit before tax was down by 57.5% mainly due to net chargeoffs of Shs14.9bn which Dfcu said were a result of “a marked improvement in the portfolio management”.
Dfcu Group is made up of two business units, the holding company Dfcu Limited and Dfcu Bank Limited. The bank is responsible for the vast majority of the company’s income.