Two banks under BoU's watch - Mutebile

The Governor Bank of Uganda (BOU), Prof. Emmanuel Tumusiime-Mutebile has revealed that two commercial banks are on the Central Bank's watch list shortly after it took over management of Crane Bank, Uganda's fourth largest bank.

Without naming the two banks, Mutebile added that the two banks are unlikely to be taken over anytime soon.

It took the Bank of Uganda more than 12 months to swing into action and take over the management of Crane Bank after it was originally placed on the watch list in since September 2015. 

Speaking about the two banks on the watch list and speculation about possible a takeover of more banks Mutebile said: "Some of what is written in the newspapers is rubbish. Our financial sector is strong and profitable. There are maybe one of two companies that need to be on the watch list but there is no other bank that the Central Bank intends to takeover". 

"The Bank of Uganda only takes over a bank when it is necessary to protect the interests of depositors. People forget that we have been successful in getting new investors for banks. We have six months to get investors for Crane Bank, and I am sure that we shall find suitable investors," he added. 

Crane Bank once the envy of many in the banking industry ran into trouble when its capital dropped close to half the sh25b regulatory minimum. The drop in capital happened as bad loans shot through the roof. 

According to Crane Banks financials, their impairment losses on loans and advances hit sh50b in 2015 from sh11.2b in 2014, a mind blowing 346% spike.  

BOU appointed Edward Katimbo- Mugwanya, a former general manager finance and audit at Centenary Bank as the statutory manager of Crane Bank to protect depositors' interests until a substantive investor is identified. 

Acting managing director, P.K Gupta has been suspended alongside the entire Crane Bank board which includes billionaire couple Sudhir and Joystna Ruparelia, businessmen Tom Mugenga, Joseph Biribonwa, and Alex Rezida among others. 

Gupta had been acting managing director for nearly two years after A.R. Kalan, who the bank claimed had gone on annual leave, left mid-2014. 

Banks lowering lending rates 

The largest of Uganda's 26 commercial banks have released statements lowering their prime lending rates, the lowest rates for their best customers to between 21% and 23% per annum.

Despite the reduction, the rates are still high and are at the same level as was witnessed in October 2011 at the height of runaway inflation.

The cut in lending rates are a reaction to a slash in Bank of Uganda's benchmark Central Bank Rate (CBR) to 13% from 14%.

It is expected that the cut will make loans cheaper and forestall the climb in bad and doubtful loans which have hit the roof and are in the region of sh2trillion.