Rape of crane bank: Yesterday two things happened. First it was revealed that Bank of Uganda (BOU) bought 350 pens at the cost of Shs 125m.
I don’t know what type of pens they are and their special purpose. But Ugandans must ask why our central bank buys pens that cost Shs 357,000 each.
Then DFCU bank announced that in the first six months of this year they have made a profit of Shs 115 billion compared to Shs 22 billion over the same period last year (an increase of 400%), and Shs 46 billion over the whole of 2016.
In six months of taking over Crane Bank they have made almost three times the profit they made for the whole of last year. They also revealed that of this profit, Shs 60 billion came from their take over Crane Bank.
Let us remember that BOU claimed that Crane Bank was insolvent, riddled with many bad loans and over statement of its actual financial position. So they sold its assets for Shs 175 billion only.
What the news of DFCU profits for the first six months of taking over Crane Bank reveals is that BOU was either extremely incompetent and/or grossly misunderstood Crane Bank’s actual financial position.
Or may be there was fraud. What we now know is that BOU sold very good assets at basement bargain prices. Why?
Let us also remember that all the money DFCU used to “buy” the assets of Crane Bank did not even go to BOU. Rather it was put into DFCU allegedly to recapitalize the bank and improve its liquidity position.
So we have a bank with Shs 1.8 trillion in assets sold for Shs 175 billion. DFCU “borrowed” from its parent company in London the entire Shs 175 billion to pay for Crane Bank assets.
This means that within the first one and a half years, profits from Crane Bank assets will pay the entire loan. Unbelievable!!
BOU and DFCU also claimed that a lot of the assets of Crane Bank were bad loans, worth Shs 550 billion. They claimed that DFCU inherited Shs 800 billion worth of good loans from Crane Bank.
Even a child of six years would see the stupidity of such a position – or the fraud involved in such a deal. If I am wrong let BOU publish the sale agreement.
DFCU had invested nothing to get these loans worth 800 billion. Given the average interest rate in Crane Bank of 25%, DFCU was inheriting an asset with income of Shs 200 billion (in form of interest per year).
Yet it would have invested very little to earn this interest. It was obvious this was a deal made in heaven for DFCU.
Meanwhile, the central bank claims that Crane Bank had non-performing loans (bad loans) worth Shs 550 billion. These were written off to zero and Sudir has been asked to pay for all of them.
So they took Shs 290 billion worth of his shareholder capital in the bank and have asked him to pay another Shs 260 billion to top up the loss.
Now MOST of all these so called “bad loans” had collateral to back them up, in most cases the best pieces of real estate in Uganda. Right now DFCU is collecting money on these bad loans. Where is this money going since Sudir has paid and is being asked to pay for the total value of all the bad loans?
This deal stinks. It smirks of fraudulent collusion between BOU, its lawyers and DFCU. Many companies lined up to buy crane bank as a going concern but BOU refused.
Why? Many companies wanted to buy Crane Bank’s bad loans. Again BOU refused. The silence ends here and now. Tomorrow I am going to reveal what actually happened.
Andrew M. Mwenda, the author, is the founder of The Independent Magazine