BoU disowns Crane Bank sale

KAMPALA- The proprietor of Crane Bank, Mr Sudhir Ruparelia last evening admitted that he hadn’t yet sought Bank of Uganda clearance on the proposed share sale in Uganda’s fourth largest bank by assets.

Mr Sudhir told Daily Monitor that it was “premature” to go to Bank of Uganda for clearance since the shareholders he did not disclose were still discussing with the strategic investor. “It’s premature for us to meet Bank of Uganda,” Mr Sudhir said. “We will meet Bank Uganda after the investors have concluded the due diligence and there should be no cause for alarm because everything will be done at the right time.”

Mr Sudhir was reacting to Bank of Uganda (BOU) statement on the proposed share sale which indicated that the regulator had not yet received any official communication from Crane Bank regarding the sale of shares. In a statement issued on Monday, the BoU revealed for any change shareholding of more than 5 percent, there has to be regulatory approval.

“As of now, the Bank of Uganda has not received any request from Crane Bank to approve a change in shareholding. Should such a request be received, the proposed shareholders will be vetted for “fit and proper” credentials and positively considered if they warrant approval,” said Ms. Christine Alupo, Director Communications at BOU said in a statement.

Ms Alupo, however, said the transfer of shares is common practice in the banking sector.
Crane Bank is currently negotiating with investors to acquire an unknown stake in the bank.

Mr. Sudhir, the Vice Chairman, Crane Bank Ltd, told Daily Monitor on Monday that they were discussing with a strategic investor who would acquire a stake in the bank. He noted that the discussions were bound by a “non-disclosure” clause not to delve into the details, including the partners. It is expected that if the shareholders of the bank and new investors reach an agreement, then BOU will be notified.

According to Section 18 (2) of the Financial Institutions Act, reads that “no financial institution shall, except with the permission of the Central Bank, allot or issue, or register the transfer of five percent or more of any of its shares to one person.”

The section also goes on to point out that permission has to be obtained from BOU in writing. The completion of the sale can only be approved by BOU.

Ownership structure
According to the Crane Bank Annual report for 2015, Mr. Ruparelia has a controlling interest (in terms of voting) of 48.67 percent in the bank by virtue of shares held directly and by close members of his family.

In 2010, he controlled 66.67 percent of the bank but by 2011, this had reduced to 56.67 percent. Since 2012, the shareholding has been at 48.67 per cent.

The other shareholders in the bank are a company called M/S White Sapphire Limited that holds 47.33 per cent stake, Ms. Jitendra Sanghani at 4 per cent and Mr Tom Mugenga at 0.01 per cent.

A company search at the Uganda Registration Services Bureau did not turn up any results for the company named M/S White Sapphire Limited. It is not yet clear who which shareholder is selling their stake in the bank.

Crane Bank has in the past expressed interest to list of the Uganda Securities Exchange, but those plans were put on hold.

Bank performance

Crane Bank turned up one of the worst performances since inception in 2015. The bank turned a net loss of Shs3.3bn in 2015 from a net profit of Shs50.6b in 2014.

This slump was attributed to an increase in Non-performing loans and provisions for bad debts as companies fell back on loan repayments. Since 1997, the bank had been witnessing a consistent upward trend in profit until 2015.

It also ceded third place to Centenary Bank in terms of assets and customer deposits. If approved, this will be second bank to change shareholding in the last two years.

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