Tanzania's Exim Bank acquires Imperial Bank Uganda

Wednesday March 9 2016

Imperial Bank in Nairobi. The bank’s 58.6 per cent stake in Ugandan subsidiary has been sold to Exim Bank. PHOTO | FILE

Imperial Bank in Nairobi. The bank’s 58.6 per cent stake in Ugandan subsidiary has been sold to Exim Bank. PHOTO | FILE 


Uganda’s Central Bank has sold 58.6 per cent shares in Imperial Bank Uganda Limited to Tanzania’s Exim Bank in a landmark transaction expected to accelerate dissolution procedures being pursued against Imperial’s troubled Kenyan parent while exploiting opportunities offered by cross border trade.

The shares were previously held by Imperial Bank of Kenya whose licence was suspended by Central Bank of Kenya in October last year, citing unsafe and unsound business practices detected in its operations.

Other shareholders in Imperial Bank Uganda include Mukwano Group and Export Finance Limited with 36.5 per cent and 4.9 per cent shares respectively.

Following the conclusion of this transaction on Monday, Bank of Uganda (BoU) officially ended its statutory management role in Imperial Bank Uganda Limited that took effect in October last year.

But the value of this transaction remains unconfirmed though analysts at Stanbic Bank Uganda estimate its price at less than Ush60 billion ($17.6 million).

Whereas CBK remains bogged down by grievances raised by some Imperial Bank Kenya shareholders over the value of their investment, BOU in contrast opted to dispose off the latter’s shares in an attempt to cut its regulatory pressures, analysts claim.

The sale of majority shares in Imperial Bank Uganda Limited also symbolises the first acquisition of shares in a commercial bank initiated by the regulator; an action that could shape future mergers and acquisitions pursued in the industry under BoU oversight.

“The law does not allow us to keep a commercial bank under statutory management for more than six months. But we are not ready to reveal the value of this transaction. The proceeds from this deal will be transferred to Kenya’s Deposit Protection Fund for purposes of settling depositors’ demands whenever they arise in relation to Imperial Bank’s liquidation process. Though we received a number of bids, we chose Exim Bank of Tanzania because of its track record in the banking industry and a pressing need to maintain shareholder cohesion in the business,” said Benedict Sekabira, BoU’s Director for Commercial Banking.

Exim Bank’s ambitions in Uganda appear hinged on quite notable growth recorded in cross border trade between Uganda and Tanzania in recent times.

“Uganda generally offers higher returns in the banking business compared to Tanzania and Kenya. We also intend to exploit opportunities created by some of our clients that are engaged in trading activities between Uganda and Tanzania,” noted Dinesh Arora, Exim Bank’s Chief Executive Officer.

Uganda’s imports from Tanzania increased to $29.56 million in the third quarter of 2015 but dropped to $17.24 million during the subsequent quarter, BoU data shows.

Exim Bank started operations in Tanzania during 1997 and has increased its branch network to 37 outlets to date, according to company records.

It owns two subsidiaries in Comoros and Djibouti. The Bank’s total assets were valued at $580 million by end of December 2015 while shareholder funds amounted to $90 million. Profit after tax stood at $14 million at the end of last year.