ANALYSIS: How Strong is DFCU Bank?


Friday, information pills January 27, order 2016 was an unusual day in the history of Uganda’s banking sector.

Bank of Uganda Governor Tumusiime Mutebile announced at a press conference that the Central Bank “has now transferred the liabilities (including deposits) of Crane Bank to DFCU Bank and in consideration of that transfer of liabilities has conveyed to DFCU bank, Crane Bank’s assets.”

Mutebile further stated that subsequent to the takeover, BoU as required by law, appointed an independent external Auditor to take an inventory of assets and liabilities of Crane Bank which exercise confirmed the Bank’s liabilities as at the September 20th, 2016, “grossly exceeded its assets and that it was insolvent.”

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DFCU welcomed the announcement and quickly took down Crane Bank’s signage, replacing it with DFCU’s.

DFCU issued a statement, saying it had “concluded an agreement with Bank of Uganda to purchase the assets and assume liabilities of Crane Bank.”

The financial institution said its board of directors at a meeting held on January 25, approved the transaction and a purchase of assets and assumption of liabilities agreement between the bank and BoU was signed on the same date.

DFCU further promised “supplemental actions” including “additional equity injection” into the bank.

ChimpReports understands DFCU has begun the process of integrating the assets and liabilities of Crane Bank into its business.

This process is expected to be concluded this Sunday.


In today’s piece, we look at the strengths and weaknesses of DFCU which has since swallowed one of the fastest rising financial institutions in the country.

According to records submitted to the Central Bank, DFCU assets grew by only 16 percent to Shs 1.6tn in 2015 from Shs 1.3tn in 2014.

In 2013, DFCU assets were valued at Shs 1.3tn.

The records further indicate that DFCU bank registered a profit (before tax) of Shs 45bn in 2013 and Shs 55bn in 2014 before regressing to Shs 49bn in 2015.

In terms of customer loans and advances as at December 2015, DFCU gave out Shs 807bn from Shs 680bn in 2014.  This represented a 19 percent growth in loans to customers.

In 2013, the bank dished out Shs 623bn in customer loans.

Deposit base

One of the indicators of a solid bank is customer deposits.

In 2013, DFCU was keeping Shs 700bn in deposits and Shs 822bn in 2014.

By 2015, the financial institution boasted Shs 914bn in deposits, signaling an 11 percent growth.

Compared with peers, DFCU came number six in deposit base strength.

Stanbic Bank Uganda recorded Shs 3.7tn in customer deposits as of December 2015 while Standard Chartered Bank registered Shs 2.6tn in the same period.

As of December 2015, DFCU’s contingent liabilities stood at Shs 67 bn from Shs 51bn in 2014.

A contingent liability is a potential liability. It depends on a future event occurring or not occurring.

For example, if a parent guarantees a daughter’s first car loan, the parent has a contingent liability.

If the daughter makes her car payments and pays off the loan, the parent will have no liability. If the daughter fails to make the payments, the parent will have a liability.

Between 2014 and 2015, DFCU’s contingency liability grew by 32 percent.

On the other hand, Barclays Bank’s contingency liabilities reduced by -24 percent and – 5 percent for Standard Chartered Bank.

Looked at from a different angle, DFCU’s total capital grew by only 5 percent between 2014 to 2015.

Total capital usually refers to the sum of long-term debt and total shareholder equity.

This is one of the calculations traditionally used when determining a company’s return on capital.

The low margins were attributed to a stressful economic climate that saw several banks register losses.


The bank’s total capital stood at Shs 115bn in 2013 before reducing to Shs 138bn in 2014 and Shs 145bn in 2015.

In contrast, Bank of Baroda saw its total capital rise to Shs 207bn in 2015 from Shs 176bn in 2014, marking an 18 percent growth.

Even Centenary Bank performed much better with its total capital growing to Shs 316bn from Shs 295bn in 2014.


In regard to non-performing loans, DFCU took the fourth position in the banking industry.

DFCU’s NPLs were in 2013 recorded as Shs 25bn before growing to Shs 47bn and then Shs 71bn in 2015.

Between 2014 and 2015, DFCU’s NPLs rose to Shs 23bn, representing a 50 percent growth.

The rise of non-performing loans (NPLs) is a salient feature of financial crises.

Huge nonperforming loans portfolio erodes the ability of banks to make profits.

In the 1990s and beyond many Nigerian banks became weak and highly unprofitable due to excessive nonperforming loans portfolio accumulated by bank promoters and management that led to their demise.

DFCU bank’s cost income ratio was unappetizing, showing 59 percent increase in 2015 from 54 percent 2014.

Cost/income ratio shows a company’s expenses in conjunction with its income.

This is done by dividing the operating costs, which includes such items as salaries and property expenses, by the operation income. Negative debts that have been written off the books are not included.

Other banks such as Eco Bank registered as 96 percent growth in cost income ratio while Standard Chartered Bank had a 53 percent increase in the same year of 2015.



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