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Even before the dust settles over an unprecedented digital fraud in which Equity Bank Uganda, in March this year, lost UGX65 billion to a combination of internal and external fraudsters, the CEO East Africa Magazine has reliably learnt that the bank has lost yet another UGX4 billion (USD1.1 million) due to negligent failure to reconcile online purchases made using Visa-enabled Equity Bank cards.
According to multiple highly placed sources at the bank, the loss was discovered around September 2024. But unlike in the first fraud, this time round, management has determined that the loss was a negligent act by officials responsible for reconciling online transactions.
The losses are spread over thousands of clients who made purchases from merchants all over the world, including Uganda. Most of the transactions are below UGX500,000.
Two officials- a female Monitoring Officer and her supervisor, a Manager, Central Monitoring have already been fired or forced to resign by the bank over the scandal.
To recover the money, the bank has placed a lien on thousands of client accounts and has begun the process of recovering money from those clients who still have active and funded Equity Bank accounts.
Some clients have, however, reportedly, since discovering the anomaly, abandoned their Equity Bank accounts, which will complicate the process of recovery. Any unrecovered money has to be provisioned as a loss as Equity Bank has to pay the merchants.
This loss is yet another setback for Equity Bank, whose image suffered severely early this year after it emerged that staff had colluded with external fraudsters to steal UGX65 billion from the bank. An audit report by the bank found there were loopholes in the processes at the bank which were not adequately addressed, even after they were red-flagged internally.
It is not yet clear how much of the UGX4 billion has been recovered from liening client accounts. The bank is tightlipped about the matter.
Yesterday, the CEO East Africa Magazine reported about Equity Bank’s increasing losses exacerbated by fraud and non-performing loans. Provisioning for such losses has been on the rise, from UGX25.7 billion in 2021 to UGX90.7 billion in 2022. In 2023, bad loans hit an all-time high of UGX191.2 billion!
Provisioning for these losses ended the bank’s 13-year profit run, translating into a UGX18.8 billion loss in 2023.
Of the UGX191.2 billion, UGX84 billion was provisioned to cover the impact of digital lending fraud that hit the bank via their Eazzy Stock, a digital lending service that enables businesses to borrow capital against their stock. Another UGX20 billion was provisioned to cover bad loans, especially to government contractors who had a bad year due to delayed payments.
As of June 2024, the situation was exacerbated by yet another UGX82.2 billion bad debt by Dei Industries International Ltd And Dei Biopharma Ltd (formerly Dei Natural Products International). We understand that Dr. Magoola’s bad loan has ballooned to over UGX90 billion since Dr. Mathias Magoola instead chose to sue the back, even after he received a UGX578.4 billion bailout from the government of Uganda.
We understand that the bank’s Non-Performing Loans to Gross Loan Ratios reached mid-teen highs in June 2024. The average acceptable rate by the regulator is 5% and below, and the industry average that month, according to the Bank of Uganda, was 4.95%.
Last week, Anthony Kituuka, the bank’s Managing Director, resigned from his position after what has been a rough 2024 characterised partly by fraud and loss. While there are mixed reactions over the reasons for his resignation⏤ whether it was voluntary or forced⏤ he insists it was of his own volition.