Why BoU TookOver Imperial Bank Operations

Bank of Uganda (BoU) has taken over the management of Imperial Bank Uganda Ltd following the suspension of Imperial Bank Ltd, Kenya by the Central Bank of Kenya (CBK).

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Imperial Bank Ltd, Kenya is the majority shareholder of Imperial Bank Uganda Ltd.

A statement issued by the Central Bank of Kenya on Tuesday shows that the Kenya Deposit Insurance Corporation has been appointed to assume the management and control of Imperial Bank for a period of twelve months.

Addressing the press on Tuesday at BoU offices in Kampala, BoU Governor Prof. Emmanuel Tumusiime-Mutebile said,

“The main purpose of the decision to take over the management of Imperial Bank Uganda is to safeguard the interests of the Bank’s customers in Uganda. This is a temporary statutory measure to allow for seamless operations as the affairs of the majority shareholder in Kenya are resolved.”

He added: “We want to assure the public that Imperial Bank Uganda Ltd will remain open and its operations will continue normally, but under the control of Bank of Uganda.”

Imperial Bank takeover by BoU comes after the closure of two other banks in recent years; Global Trust Bank (GTB) on July25, 2014 and National Bank of Commerce (NBC) in September 2012. These were closed after failing to become commercially viable.

Imperial Bank Poor Performance

Imperial Bank Uganda Limited commenced operations in January 2011.

It is a subsidiary of Imperial Bank Kenya Limited; a fully-fledged commercial bank founded in January 1996.

Since its inception in Uganda, the bank has been recording losses-possibly as a result of new operations.

Last year, it was among the worst performing banks, recording a net loss of Shs1.4bn, from Shs1.9b in 2013.

In 2012, the bank recorded a loss of Shs1.7bn. The bank’s Non-Performing Loans (NPLs) stood at Shs9.12bn in 2014, down from Shs11.3bn in 2013.

Importantly, the bank’s capital stood at Shs24.2bn in December 2014, lower than BoU’s minimum capital requirement of Shs25bn.

In 2013, its capital stood at Shs25.5bn. However, a further injection of Shs2.5bn by issue of 2,300 ordinary share of Shs1, 000,000 each was effected in January to bring the bank in line with regulatory requirements.

By the time of BoU’s takeover, the bank had about five branches all operating in Kampala.

According to sources, the bank’s assets and deposits are likely to be taken over by another bank just like the case was with National Bank of Commerce and Global Trust Bank.