Bank of Uganda sold Crane Bank for Shs200 billion to Dfcu Group; payable over 3 years, in just 11 months after the contentious deal, Dfcu has reported earning Shs260 billion on the deal alone!
Is this Dfcu’s Juma Kisaame’s genius or perhaps proof of earlier claims that the sale of Crane Bank was much more than what the eye could see?
According to the full 2017 results released on Thursday March 29th 2017, Dfcu reported that Total income had grown by 101% from Shs 257.3 billion in 2016 to Shs517.3 billion in 2017 largely on the account of the Crane Bank acquisition.
To understand how much of this windfall was contributed by Crane Bank, you need to understand that the previous year, Dfcu’s total income grew by just 15.4% from Shs222.9 billion to Shs 257.3 billion. In fact on average, over the last 5 years, Dfcu’s income has been growing at an average 13.3% annually; so a sudden 101% growth can only be attributed to Crane Bank.
To help explain the “Crane Bank Effect’ on Dfcu’s rosy figures, we have created various scenarios that estimate Dfcu’s performance with and without Crane Bank.
In scenario A, had Dfcu maintained their 2016 growth rate in total income of 15.4%- at most their total income would have grown to Shs297 billion. Under this scenario, the ‘Crane Bank Effect’ on earnings would be Shs220.4 billion.
In scenario B, we assume a modest 20% in total income, in which case total income would have grown to Shs308.8 billion. Either way using this assumption, buying Crane Bank at the price they did would have delivered a Shs208.5 billion windfall. This particular scenario is however unlikely given that the banking industry in 2017 came under intense pressure as industry lending grew by only 5% from Shs12 trillion to Shs12.82 trillion and interest rates fell from 22.37% to 20.28%.
Net interest margins to fall from 12.81% in 2016 to 11.57% in 2017- according to a Bank of Uganda report.
Scenario C takes into account Dfcu’s trended average 5-year income growth rate of 13.3% and going by this rate, without Crane Bank, Dfcu’s income would have grown to Shs291.5 billion- putting the ‘Crane Bank Effect’ on income at Shs260 billion in just one year from the deal.
All three scenarios, regardless of their working assumptions show that either way, at a Shs200 billion price-tag, Dfcu needed just one year to earn the money to pay off Crane Bank.
Now that is what they call a super bargain purchase, especially when you are being asked to pay the Shs200 billion over a period of three years!
‘Fraudulent sale’
It is not only Dfcu’s total income that benefitted from the ‘Crane Bank Effect.