Tanzania’s largest bank posts Sh2bn quarterly loss

Dar es Salaam. Tanzania’s largest bank, CRDB, has posted a Sh1.9 billion loss in the third quarter of this year due to a large number of unpaid loans as well as accumulating tax bills from the past.

The loss is a significant dip from the Sh24.4 billion after tax it gained in the second quarter of this year. The bank got Sh37.6 billion profit after tax in the third quarter of 2015.

A financial statement published in newspapers over the weekend also showed the bank had also an extensive expansion drive which culminated in adding 82 branches for the whole CRDB group.

“The group’s cumulative profit was impacted by strong provisions from non-performing loans (NPL) to align with changing regulatory requirements… The group has also provided for past tax expense in relation to 2011-2013 tax claims,” the statement said in part.

The statement shows that the amount of bad loans written off by the CRDB’s accounting books reached Sh38.6 billion in September this year from Sh19 billion in June.

The CRDB Bank, which is listed in the Dar es Salaam stock exchange, is the largest bank with Sh5.3 trillion in total assets as by September 2016. The assets have, however, declined by Sh200 billion from the Sh5.5 trillion recorded at the end of the second quarter in June this year. The bank is also the largest in terms of customers deposits which remained unchanged at Sh3.9 trillion.

Even as CRDB Tanzania recorded a loss the CRDB group, which has operations in neighbouring countries such as Burundi, registered a Sh2.8 billion profit after tax at the group level in September, 2016, which is a decrease from Sh38.5 billion after tax it registered in the same quarter in 2015. The CRDB group earned Sh28.5 billion profit after tax by the end of June 2016.

The news of the loss of CRDB Bank comes after the Bank of Tanzania announced that it has taken over the operations of Twiga Bancorp which is on the verge of collapse. Twiga registered a loss of Sh694 million after tax in September 2016 from a profit after tax of Sh189 million in June, 2016. Bank of Tanzania governor Benno Ndulu said Twiga is significantly undercapitalised and it would close for the whole of this week as the BoT determines the way forward.

Experts say commercial banks are passing through difficult times currently because of a crackdown on tax evasion, corruption and embezzlement which has reduced people’s purchasing power and the capacity of some to pay back their loans.

Prof Honest Ngowi of Mzumbe University says what is happening in the banking sector is a reflection of the real situation in the economy.

“Banks’ main business is loans and when businesses are not performing very well then there is a possibility of an increase non-performing loans. So harsh tax and austerity measures implemented by the new government could be partly to blame,” he said.

Some other banks have recorded losses and others a significant reduction in profit after tax in the third quarter according to a survey done by The Citizen on published financial statements of banks. Amana Bank, for example, registered a loss after tax of Sh195 million in September, 2016 from a Sh517 million profit after tax in the second quarter that ended in June, 2016. NBC Bank’s profit after tax declined to Sh984 million in September 2016 from the profit of Sh4 billion in June of the same year.

Experts say the decision by the government to direct its institutions to transfer their money to the BoT also has affected the profits of many banks.

In January this year, the government ordered ministries, public corporations and local government authorities to immediately transfer their money to the central bank, a move that was estimated to remove Sh500 billion from commercial banks. Tanzania has over 50 banks but 70 per cent of the market is dominated by the 10 largest banks in terms of assets, deposits and gross loans.