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Crane Bank tops Shs 210bn capital base

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The newly openned Crane Bank branch in Entebbe. INDEPENDENT/ JIMMY SIYABank registers “excellent” results in 2012 despite tough economic environment

For most banks, 2012 has not been a good year at all. A quick look at their financial results shows a higher level of bad debts, a larger non-performing loans portfolio, a decline in customer deposits and a jump in the overall expenditure and reduced interest earnings on various services among other factors.

This has been largely attributed to a tough economic environment that shows inflationary pressures staying somewhat up in the year, interest rates remaining high, while the exchange rate has also remained unfavorable for most part of the year among other factors.

These factors constrained demand for credit and hiked the cost of doing business and thus resulted in slow growth in 2011 and the larger part of 2012.  Overall national economic growth was recorded at 3.4% in 2011/12 down from the over 6% a year earlier.


A.R Kalan, the Crane Bank managing director, however describes their 2012 performance as “excellent” but “challenging”. Excellent because his bank’s authorised capital doubled to Shs 210 billion in 2012 from Shs 100 billion a year before, which is way above the regulatory requirements.

But he says the high interest rates, which were caused by the tight monetary policy by the Central Bank intended to battle high inflationary pressures, negatively impacted on the demand for bank loans and other commercial services.

“The economy still appears to be challenging but we are positive about the future,” he said.

The cost of funds also went up in the market and that meant there was a jump in the cost of doing business in the sector. Ideally, if the economic environment had been favorable in the year, businesses including banks, would have recorded better results compared to what they did in the year.

Kalan said his bank recorded a 14.45% increase in profits before tax, which rose to Shs 103.27 billion in 2012  up from Shs 90.23 billion a year earlier.

He told The Independent in an interview that their aim going forward is to maintain Crane Bank’s position as the largest indigenous commercial bank in the country currently.

The bank’s profit after tax increased by 20% to Shs 80.4 billion in 2012 from Shs 66.8 billion in 2011, while total assets increased by 21.5% to Shs 1,168 billion in 2012 from Shs 962 billion in 2011.

Customer loans and advances increased by about 12% to Shs 587.5 billion in 2012 from Shs 524.6 billion in 2011. Customer deposits increased by about 23% to Shs 841.5 billion in 2012.

The bank’s capital and reserves increased by 44% to Shs 259.8 billion in 2012 from Shs 180.3 billion in 2011.

On the other hand, the bank’s non-performing loans and other assets jumped to Shs 24.7 billion in 2012 up from Shs 93 million in 2011. Kalan said however, the 4.2% level of their non-performing loans is below the industry average of about 5.8-6% - an indication that other banks suffered a lot more stress than Crane Bank.

Kalan suggested that the strong performance for the year was “a clear testimony” to the underlying strength of the business resulting from the strong foundation built over the years through their continued investment in infrastructure, products and people.

He added that the bank’s expansionary program and the implementation of the mobile banking products across the country, the good relationship with the customers have helped the bank to stay on a growing path.

Expansion plan

While other banks are bent on cutting back on capital investment, Crane Bank intends to expand its branch network to 40 by the end of this year from the current 27.  At the beginning of last year, the bank announced that the branch expansion program was part of the five-year customer excellence strategy aimed at establishing at least 50 branches by 2015. Initially, the bank had only managed about 15 branches in 15 years.  Also, the process of establishing an office in Rwanda will soon be concluded.  The bank, owned by businessman Sudhir Ruparelia, who was recently ranked the richest man in East Africa by Forbes magazine, if it goes regional, it will become the first Ugandan-owned bank to venture outside the borders.

Industry challenges

A part from the harsh economic environment, Kalan said lack of skilled human resource and high employee turnover continue to bedevil the financial services industry as newer banks tend to poach trained staff from existing banks probably to avoid costs on training their own manpower.

Kalan applauded the central bank for combating inflation which had gone up to 30.4% at the end 2011, the highest since 1993 to 3.4% as of April 2013.

He said the low inflation coupled with the growing trend of customer demand for the loans and other services from the bank means the future is “bright.”

Indeed, experts are positive that keeping inflation rates at the lowest level while making credit affordable was healthy for the economy,” Lawrence Bategeka, a senior economist and Research Fellow at the Economic Policy Research Centre at Makerere University, said  with cheap credit it becomes easier to invest into productive sectors of the economy.

Asked to comment on the rising number of bad loans in banks, Bategeka said it was a result of the volatile economic conditions in the last two years, which could force banks to become more risk averse.

Going forward, Kalan said Crane Bank would consolidate its position in the market by offering a collection of banking and financial services products including online banking, mobile banking,  agricultural finance, international money transfers, VISA services, government to bank services among others.

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