Crane Bank ‘ghosts’ haunts dfcu

The lender has recorded a drop in profits again

Kampala, Uganda | ISAAC KHISA | Did dfcu mess up its growth trajectory with the acquisition of Crane Bank assets? How can it evolve to make more money for the shareholders? dfcu management seems to be grappling with these questions following another sharp drop in profits.

Financial results released on Aug.16 shows that the listed lender, which had previously recorded continuous growth in profits prior to acquisition of Crane Bank assets, recorded a 14.4% drop in net profit to Shs35.6bn for the first six months of this year to June.30 due to a reduction in borrowings, lower recoveries and increased operating expenses.

During the first year of Crane Bank takeover in 2017, dfcu recorded a whooping Shs114bn in net profit for the half year, up from Shs23bn in 2016.

Loans and advances reduced from Shs1.42bn in 2018 to Shs1.36bn in 2019 as the bank maintained a cautious view of lending to small and medium enterprises citing turbulent circumstances in the international financial markets such as Brexit, trade wars, lower growth in China and Europe.

Similarly, customer’s deposits fell from Shs2.0bn to Shs1.99bn during the period under review. Though the bank’s net operating income grew marginally from Shs146bn to Shs148.5bn, its operating expenses grew 3% to Shs99.1bn.

This is the second time in a row that the lender is registering a sharp drop in profits. Last year, dfcu recorded a 52% decline in net profit to Shs61.7bn citing decline in earnings from investment in government securities.

Also, the bank’s total assets reduced by 5% from Shs3.1tn to Shs2.9tn due to repayment of borrowed funds and subordinated debt.

This comes barely a year since the financial institution hired Mathias Katamba as the managing director in 2018 to replace Juma Kisaame, who had served for 11 years. This followed controversial take-over of Crane Bank assets in 2017.

However, the recent performance tends to reveal that the lender is yet to recover from the post Crane Bank controversial acquisition era.

dfcu’s drop in profits comes at the time the banking sector is recording an increase in demand for credit, implying that it would have easily tapped into the opportunities to record faster profit growth like its counterparts.Stanbic Bank, for instance, registered an increase in net profit from Shs96bn to Shs135bn for the first six months of the year ending June 30, driven by increased borrowing and non-interest income.The latest Bank of Uganda […]

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