Tanzania's top banks raise profits amid drop in bad loans

Dar es Salaam. The third quarter of 2019 had positive outcomes for five of Tanzania’s eight largest banks as they managed to raise their profits while cutting nonperforming loans (NPLs) in an improving liquidity environment.

CRDB Bank Plc, NBC Bank, Standard Chartered Bank, Stanbic Bank and Azania Bank saw their profit levels rising during the third quarter of 2019 compared to a similar period in 2018.

Each of the five, along with NMB Bank Plc, Exim Bank and Diamond Trust Bank (DTB), has assets exceeding Sh1 trillion.

CRDB Bank Group’s net profit rose by 35.5 per cent to Sh31.062 billion during the third quarter of 2019 from Sh22.928 billion during a similar period last year, thanks to improvements in both interest and non-interest income streams.

The NPLs were contained down to 7.48 per cent at group level but its total assets, as reported on September 30, 2019, fell to Sh6.2 trillion from Sh6.38 trillion on June 30, 2019.

The bank’s managing director, Mr Abdulmajid Nsekela, said yesterday that a drop in balances with the BoT and with other lenders was an indication that the money, collected in form of customers’ deposits, was actually being directed towards stimulating production in the productive sector.

“In some of the past quarters, banks invested depositors’ money in government securities as they cushioned it (the cash) against high NPLs….Keeping a lot of money with the BoT is not a good option either. What we are doing now is actually giving the cash out in loans to stimulate economic production and this is what you saw in the numbers,” said Mr Nsekela who doubles as chairman for Tanzania Bankers Association (TBA).

While maintaining a 1.1 per cent NPL to total gross loans ratio of 1.1 per cent, Standard Chartered Bank Tanzania saw the size of its total assets declining to Sh1.56 trillion during the third quarter of 2019 from Sh1.64 trillion during the second quarter of 2019.

This was primarily on a Sh162 billion drop in the loans it has extended to other banks. However, it managed to raise its net profit by 550 per cent from only Sh893 million during the third quarter of 2018 to Sh5.8 billion during the 2019 third quarter.

The National Bank of Commerce (NBC) came out of the woods after it managed to register a Sh3.1 billion net profit during the third quarter of 2019 from a Sh5.56 billion loss during a similar period last year.

With efforts to streamline its operational efficiency, NBC was able to cut the amount of bad debts that had been written off from Sh11.539 billion during the third quarter of 2018 to only Sh1.278 billion during the third quarter of 2019. NPLs were reduced to 6.9 per cent during the 2019 third quarter from 7.2 per cent.

Stanbic Bank’s net profit jumped from Sh4.359 billion during the third quarter of 2018 to Sh6.023 billion during the third quarter of 2019.

Azania Bank, which entered the group of first tier banks after it acquired Bank M earlier this year, saw its net profit rising by a cool 400 per cent to reach Sh4.413 billion during the third quarter of 2019 from only Sh885 million during a similar period last year. Azania’s assets dropped to Sh1.102 trillion during the third quarter of 2019 from Sh1.18 trillion during the second quarter of 2019 but its NPL to total gross loans ratio dropped to 29.9 per cent from 31.27 per cent.

Analysts say a drop in NPLs signify that the banking sector was actually becoming more and more innovative in loan issuance, follow up and recovery.

“The drop in NPLs simply means that banks are becoming more and more innovative in recovery strategies…it means that banks are recovering both the principal loan and its interest,” the Bankable Tanzania Limited managing director, Mr Lawrence Mafuru, told The Citizen on phone yesterday.

Like CRDB Bank, total assets for NMB Bank Plc declined to Sh6.124 trillion during the third quarter of 2019 from Sh6.44 trillion during the second quarter of 2019.

Its net profit for the third quarter of 2019 stood at Sh24.9 billion, a drop from the Sh32.8 billion that was registered during a similar period last year. This was primarily on account of an amplified provision of probable bad loans which rose from Sh27.4 billion during the third quarter of 2018 to Sh44.4 billion during the third quarter of 2019.

Exim Bank’s assets dropped to Sh1.2 trillion from Sh1.6 trillion. Its net profit dropped from Sh9.503 billion during the third quarter of 2018 to only Sh1.862 billion during the third quarter of 2019.

DTB Tanzania’s net profit dropped to only Sh841 million during the 2019 third quarter from Sh6.5 billion during a similar period in 2018.