DFCU wins case against former Crane Bank owners but its financials falter

Saturday October 15 2022

Bank officer briefs clients on investments opportunities. DFCU Ltd is the holding company of DFCU Bank, one of Uganda’s top tier lenders with assets estimated at more than $777 million. PHOTO | MORGAN MBABAZI | NMG


Investors in Uganda’s DFCU Ltd fear a suit filed by former Crane Bank shareholders in a London court has dented the company’s financial performance. Though the institution won the case, it has failed to declare dividends for 2021 raising speculation the legal battle had affected its credibility in the market.

DFCU Ltd is the holding company of DFCU Bank Ltd, one of Uganda’s top tier lenders with assets estimated at more than Ush3 trillion ($777 million).

The Ush816 billion ($211 million) case was filed in London in August last year following a disagreement between the former owners of Crane Bank, its directors and Bank of Uganda (BoU) and DFCU Ltd over the acquisition of Crane Bank assets and liabilities by DFCU Bank in January 2017 for Ush200 billion ($51.8 million).

The acquisition deal was preceded by financial troubles faced by the Crane Bank, a scenario that prompted BoU to place the lender under statutory management in September 2016 to protect customers’ deposits.

Legal victories

A series of legal victories registered by former Crane Bank owners and directors in Ugandan courts against BoU since 2017 have generated a credibility crisis for the bank.


Despite news of the sweet legal victory in London that filtered into local media platforms on October 7, no shares were traded on the DFCU Ltd counter at the Uganda Securities Exchange between October 10 and 12, an indicator of investor worries over the company’s future in the aftermath of the Crane Bank acquisition.

The company’s share price was stagnant at Ush640 ($0.16) during the lockdown period and eventually dipped to Ush540 ($0.14) during the third quarter of 2022 on account of weak earnings recorded during the first six months of the year, observers claim. Significant bad debts provisions implemented by DFCU Bank last year also forced its parent company to forfeit dividends for 2021 while other listed banks declared modest dividends.

“I think that court case was quite a stretch in itself. The vicious legal battles fought by the former Crane Bank shareholders against BoU and DFCU Ltd might discourage future acquisitions of failed banks by their industry peers for fear of legal wars.

‘‘DFCU Bank has failed to unlock value out of the Crane Bank acquisition and it could take another five years before the bank is able to reorganise itself and generate strong earnings.

‘‘We exited the DFCU counter a long time ago because of the prolonged legal battles. We would need to carry out a fresh financial valuation of its shares before considering any investment,” said George Mulindwa, general manager at GenAfrica Investments Uganda Ltd.

Bad loans

A business analyst at Uganda’s National Social Security Fund said DFCU bank had written off numerous bad loans since it acquired Crane Bank

‘‘The lack of a clear strategy on how to resolve underlying loan book issues worries some of us.

‘‘While some of its industry peers are beginning to recover from the negative effects of Covid-19 lockdown measures, DFCU is still struggling with those challenges and failed to pay a dividend for 2021,” the business analyst who requested anonymity citing confidentiality rules said.

Fresh legal options available for the aggrieved parties remain unclear following the London court ruling that highlighted fewer litigation choices and considerable legal expenses incurred by the affected entities.

“The petitioners filed that case in London on the premise that some of DFCU Bank’s directors are Europeans and are resident in the United Kingdom. But the Court ruled that it has no right to interfere in the actions of a sovereign state and its institutions.

‘‘For that reason, that case might not be entertained again in a British court. There is no need for DFCU Ltd to negotiate with a losing party in a court of law,” said a Kampala based commercial lawyer who requested anonymity, citing client sensitivity issues.