Fresh details have emerged as to why Britain’s Commonwealth Development Cooperation Group (CDC) that owns nearly 10% shareholding in dfcu Bank is quitting at this critical stage.
Sources say CDC isn’t happy with the decisions taken by the bank’s board and top management.
For example, it is claimed that CDC advised dfcu against taking over Crane Bank, but the bank went on to seal the deal with Bank of Uganda (BoU)-albeit controversially.
It is reported that dfcu paid a paltry Shs200bn to acquire Crane Bank, whose assets were valued at Shs1.3 trillion by its shareholders.
This controversial takeover has resulted into legal battles between Crane bank shareholders on one hand and dfcu and BoU on the other.
Sources say that it is this state of affairs that is forcing CDC, dfcu’s oldest shareholder to sell off its shares in the bank.
CDC joined hands with the Government of Uganda in 1964 to set up Dfcu.
CDC’s investment in Dfcu, according to the institution’s official website, is US$15.1m (equity) and US$10m (subordinated loan)
After half a decade of doing business with dfcu, CDC on June 14 wrote to the Commercial Bank’s top management, communicating its intention to sell its stake.
CDC’s Investment Director in charge of Financial Institutions, Irina Grigorenko, said it was “undertaking a review of its investment in DFCU Limited which may lead to the disposal or some of some or all of its shares in DFCU over the short to medium term.”
The institution said after being a shareholder for half a decade, “it is our aspiration to exit in a manner that causes minimum disruption to the business and ensures the orderly trading of DFCU’s shares.”
Irina also indicated that CDC’s objective is to identify “like-minded investors who could support DFCU in its new phase of growth.”
It remains unclear how this will affect the bank but CDC expressed hope that DFCU would continue to “succeed with the support of Arise B.V., its major shareholder.”
dfcu recorded an impressive Shs127.6 billion net profit in the year ended 31 December 2017, up from Shs46.2 billion registered in 2016. This means that the profit increased by a record Shillings 81.4 billion.
However, sources say CDC is determined to quit despite dfcu’s abnormal profits in order to save its image.
As of October 2017, the major shareholders of dfcu bank are; Arise BV (majority shareholder with 58.71% ownership), CDC Group of the United Kingdom (9.97%), National Social Security Fund (Uganda)-7.69%, Kimberlite Frontier Africa Naster Fund (6.15%), SSB-Conrad N. Hilton Foundation (0.98%), Vanderbilt University (0.87%) and Blakeney Management (0.63%).
Others are Bank of Uganda Staff Retirement Benefits Scheme (0.59%), Retail investors (11.19%) and two undisclosed Institutional Investors (3.22%).
Over the last 50 years, CDC has been an active investor and provided advice to help the bank develop and grow.
CDC’s investment in DFCU has allowed the bank to provide the long-term funding to support the SMEs which are vital to Uganda’s economic development.