Tropical Bank has come out to clarify on three former top managers that were fired over fraud.
In a statement, the bank says it is responding to malicious claims that have been circulating in the media about its financial status.
“Tropical Bank Ltd regrets the malicious statements circulating in the media regarding the bank and its management, specifically that some senior officials of the bank resigned allegedly because of the bank’s poor financial condition,” reads an excerpt from a press statement released by the bank.
“We wish to clarify that the said allegations are false and intended to mislead the public,” the statement added.
The statement goes on to say that: “The following senior members of staff were subjected to a disciplinary process and subsequently dismissed from the services of the bank by the Board of Directors over fraudulent activities and gross violation of the bank’s policies and procedures which actions have exposed the bank to a huge financial loss.”
These former staff include among others;
1. Mr Dennis Mugagga Kakeeto, formerly Executive Director
2. Mr. Hussein Sentamu, formerly Head of Credit
3. Mr. Morris Mugwiri, formerly Head of Corporate Banking
“Therefore, the above mentioned staff are no longer working with Tropical Bank Ltd and whoever deals with them does so at their own risk,” the bank’s management emphasized.
Tropical Banks says that the Central Bank of Uganda was duly notified of their subversive activities and at the same time the Uganda Bankers’ Association is aware of the action taken against the said staff.
The bank says it continues to investigate any fraudulent activities and shall take action against anyone found culpable including those who have left the Bank.
“We further wish to inform our esteemed customers and the general public that Tropical Bank Ltd is firmly established on the partnership between the Government of Uganda and Libya and is committed to protecting its depositors’ funds as well as the interests of all other stakeholders,” they assured the public.
Bank performance
Media reports showed that Tropical Bank Uganda had become under-capitalized after it posted the biggest loss in the banking sector this year.
The bank, which first opened in the country in 1973 as Libyan Arab Uganda Bank, is now below the required minimum capital by UGX3.8bn according to audited results published on Friday.
Letters to My Younger Self: Humphrey Asiimwe—"Ambition Without Purpose Leads Nowhere"Commercial banks are expected to have at least UGX 25bn as minimum capital. For Tropical, this has been eaten into by cumulative losses the bank has been making.
With the bank undercapitalized and unprofitable – it made a loss of UGX 23.9bn in 2019 from UGX5.7 billion in 2018 – which media reports state had auditors worried.
According to KPMG, an audit firm that audited the bank’s accounts, Tropical bank’s situation points to the fact that “material uncertainty exists which cast significant doubt on Tropical Bank Limited’s ability to continue as a going concern”
A going concern is a business that is assumed will meet its financial obligations when they fall due.
The auditors added that “the COVID-19 outbreak affects the bank and results in certain uncertainties for the future financial position and performance of the bank. “
People familiar with the industry told URN that Tropical bank needs capital injection as fast as possible. If the owners can’t put in money, the bank will have to be sold.
Tropical bank is 99% owned by Libya. The bank was in 2011 – at the height of the uprising that ousted former Libyan leader Muammar al-Gaddafi – handed over to Bank of Uganda after a resolution by the United Nations Security Council to declared a freeze on all Libyan assets in foreign territories.
The Central bank handed it back to owners in 2012 when the fighting seemed to have ended. However, the financial institution has for some time now been struggling to make money in the market.
In 2018, the bank’s then managing director Kreshi Sameh Mahmud’s period in office was terminated and ordered to handover office immediately. Abdulaziz Mohamed was appointed in the position.
Last year results show the bank holds UGX43bn in cash with Bank of Uganda – this is the money drawn for the needs of its customers.
Its loans to customers grew to UGX180bn in 2019 from UGX128bn in 2018. This should ordinarily be a good thing if the bank can collect these debts and interest.
Yet out of these large exposures – the money given to few big borrowers amount to UGX114bn – putting the bank in a precarious situation in the case that big borrower fails to pay.
The bank’s assets topped UGX316 billion last year from UGX289bn in 2018. However, some of these might have to be offloaded to get money to shower the company’s minimum capital.
Without that, Tropical bank could have a hard time operating going forward.