Keystone Bank Limited (KBL) is selling its 80% stake in Orient Bank, five years after acquiring the bank.
Nigerian media and Bloomberg quoted Philip Ikeazor, CEO of Keystone Bank saying they were throwing in the towel because of high non-performing loans, in their subsidiaries in Liberia, Uganda and Sierra Leone.
He also said they were not ready to inject more money in Orient Bank, Uganda’s 13th largest commercial bank, to shore-up the none-performing loans.
Julius Kakeeto, the Acting Managing Director, Orient Bank Uganda has confirmed to our reporters that indeed Keystone will be selling the 80percent stake in the bank.
Orient Bank has been profitable since the 2009 takeover, at least until end of 2013 when the bank posted a loss of 16 billion Uganda Shillings.
This as a result of reduced borrowing which in-turn led to reduced income in 2013, according to the bank’s financial statements. According to bank officials, 2013 was the worst year for the bank since its inception in 1993.
Kakeeto also said that the loss in 2013 was a “very rare occurrence in its history of operation,” blaming it on the economic conditions that had an impact on the ability of customers to pay their loans.
He also said that the shareholders had increased the Bank’s authorized share capital from 50 Billion Uganda Shillings to 100 Billion Uganda Shillings. Shareholders also made a cash injection equivalent to 26.5 Billion shillings towards capital.
In 2013, according the Bank of Uganda (BOU) annual supervision report, the ratio of non-performing loans to gross loans grew to 6.5percent up from 4.2percent. Orient Bank also spent 43.4 billion Uganda Shillings of its income to forego some of the debts.
Orient Bank was founded in Uganda in 1993, and has been expanding since then. In 2009, Bank PHP of Nigeria bought 80percent stake in the bank at close to 160 billion Uganda Shillings from two Indian families. The two families still own 20percent of the bank.
Bank BHP back in Nigeria run into financial trouble in 2011 and was taken over by the government owned Keystone Bank Limited. All this while, Orient Bank has maintained a healthy balance sheet.
Orient bank also survived the series of bank closures in the late 1990s.
Seeking to reassure customers, Kekeeto said the divestiture will not affect the day to day operations of the bank.
Bank of Uganda (BOU), the regulator declined to comment on the matter.
Just a week ago, BOU closed Global Trust Bank and handed its management over to DFCU Bank.