Known to be a ruthless businessman and negotiator, city tycoon Sudhir Ruparelia is in a bad state after realising his valuation of his Crane Bank Ltd. started 21 years ago has suddenly fallen from $350Million to $150M in just a few hours, a person familiar with the matter told this website.
Bank of Uganda took control of the bank, within which Mr. Sudhir was still negotiating selling a stake to former Barclays Plc boss Bob Diamond’s Atlas Mara but the experienced American banker was holding for a $300Million buy-in before Uganda’s Central Bank swung the axe.
“To be honest the man (Sudhir) is in shock considering the receivership means his bank’s value on the market falls by over 80% so the only investor Atlas Mara Ltd who Sudhir had interested nearest to his valuation as controlling shareholder will now look at Bank of Uganda’s forced market valuation of Crane Bank in a few days,” our source, asking not to be identified because the discussions are private revealed.
Bank of Uganda Governor Tumusime Mutebile on Thursday suspended the bank’s entire Board of Directors instilling his Statutory Manager, Mr Edward Katimbo Mugwanya to assume the management as Managing Director, control and conduct of the affairs and the business of the bank.
From Sudhir’s $350M valuation, the sale is now down to government valuer’s estimation of the the Bank’s fixed assets at a forced rate while the almost 500,000 accounts and 46 branches in Uganda, made a loss of 12.5 billion Ugandan shillings ($3.6 million) last year as impairment charges almost quadrupled to 50.4 billion Ugandan shillings and operating expenses rose 43 percent to 103.7 billion Ugandan shillings.
TheUgandan in an investigation discovered that that Crane Bank’s auditors, KPMG (Klynveld Main Goerdeler and Peat Marwick, gave a qualified opinion of the bank’s 2015 financial records in which non-performing loans increased.
In banking terms, a qualified opinion is a situation in which the auditors receive limited information on the company’s financial performance in a situation where the company does not meet the requisite accounting method standards.
They also found that the numbers did not add up to qualify such results as not much information was given to explain how the figures were arrived at.
In a deceptive way however, the Crane Bank decided to quote KPMG in its independent audit report to Crane Bank’s board signed on 29th April 2016 as saying: “In our opinion proper books of account have been kept so far as appears from our examination of the bank’s statement of financial position and the statement of comprehensive income are in agreement with the books of account.”
The Central Bank had earlier this week given the bank a clean bill of health, assuring customers that the company was in a good financial position but turned around and today placed the bank under receivership insisting it is “significantly undercapitalized” and poses a risk to the nation’s financial system.
“Maybe that’s why they were looking at it — the bank was in trouble and they thought they could buy it for a cheaper price and they would recapitalize it,” said Ayodele Salami, who holds Atlas Mara among the $450 million of African equities he oversees as chief investment officer at Duet Asset Management in London. “Now that the bank has gone into curatorship, it’s still entirely possible for them to buy it. The central bank might be so happy to give it away to you and not have to put its own money into it.
Economist and PHD fellow in South Africa Enock Twinoburyo says: If you look at the computations from published financial statements for 2015 you will understand the reasons for Crane Bank’s woes. The tables are drawn from the commercial financial statements for 2015, the banking sector performance inform of profits and assets is varied and a reflection of the recent slowdown in economic growth performance. The top 8 banks have asset value of more than UGX 1 trillion shillings and they account for the 74% of the asset value in 2015. Overall, the banking profits for 2015 of UGX 486 billion represent a reduction from UGX 533 billion in 2014, largely reflecting the increase in operational expenses and provisions for non-performing loans 2 of the top five banks (Standard Chartered and Crane Bank). Both recorded significant drops in profits, with Crane bank the fourth largest by asset value posting the third poorest performance in profitability in 2015 from 4th best performance in 2014.