After five years of uninterrupted loss making, Global Trust bank did not have any chance to survive the banking industry regulator's axe.
Bank of Uganda said on Friday it decided to close the bank to protect the interests of the depositors. BOU says it has had several interventions to warn and help the bank push-up but in vain GTB becomes the second bank to be closed within a period of two years. National bank of Commerce closed shop in October 2012, with Crane bank taking over some of its assets.
Addressing the media at BOU head offices on Friday, Governor Emmanuel Mutebile stressed that the bank did not have significant linkages with other players in the industry thus its closure would have no impact on the banking industry.
"The bank has failed to become commercially viable. Since it was established in 2008, GTB has incurred persistent losses which have accumulated to Shs 60bn,"
Mutebile said. "As long as a bank is in trouble, we shall take action as quickly as possible. BOU will not tolerate loss-making banks."
He added that there was no realistic prospect that the bank would become profitable in future. A Nigerian insurance firm, Industrial and General Insurance Company Plc, owned a 45 per cent stake in GTB. The remaining stake is owned by four corporate investors and eight individual investors.
It opened shop in Uganda in 2008, after buying Commercial Micro Finance ltd (CMF).Dfcu bank takes over GTB's loan book together with its investments in government and all its customers' deposits amounting to Shs 73bn, a move that is likely to strain or boost Dfcu's operations. GTB customers will automatically access their accounts from Dfcu when it opens tomorrow (Monday).
Addressing journalists on Friday, Juma Kisaame, the Dfcu managing director, agreed that they hadn't taken enough time to study how GTB was operating. But he revealed there would be sure benefits from this takeover.
"A performing loan book is income for us. Treasury bills and bonds is income," Kisaame said.
Previously, banks that have taken over others have struggled a bit, like Barclays after taking over Nile bank. At the Uganda Securities Exchange, there was no noticeable movement in share price even after the news that Dfcu was taking over GBT, an indicator that perhaps investors are still studying the transaction. Dfcu's share closed at Shs 1,200.
In all, however, Dfcu looks to benefit. In the year ended 2013, it reported its deposits had reached Shs 700bn – there is going to be some small boost. After hitting the A-class banks with assets worth over Shs 1tn in 2012, last year it did not disappoint as it boosted the assets to Shs 1.2tn.
This puts more competition on Centenary bank and Crane bank that have been slightly ahead of Dfcu in terms of assets. Both banks have assets worth Shs 1.4tn Stanbic and Standard Chartered have assets far higher.
GTB's six branches – Bwaise, Owino, Pallisa, Phaida, Nateete, and Kikuubo – will now be used by Dfcu. In all, the bank had 21 branches. Kisaame said they would incur a small cost to rebrand the branches to match Dfcu's colours and logo.
"All other assets not acquired by Dfcu bank will be placed into liquidation. Any value realised over and above the value of its liabilities and the costs of liquidation will accrue to its shareholders," Mutebile said.