How top banks raised profits by 33 percent

The banks with assets above one trillion with their respective cumulative Q3 net profit in brackets are NMB Bank Plc (Sh398.41 billion), CRDB Bank Plc (Sh280.45 billion), Stanbic Bank (Sh95.94 billion), Standard Chartered Bank (Sh64.01 billion), National Bank of Commerce (NBC) (Sh62.82 billion), Citi Bank (Sh44.27 billion), Peoples Bank of Zanzibar (Sh41.97 billion), Exim Bank (Sh40.97 billion), Absa Tanzania (Sh37.78 billion), KCB Tanzania (Sh35.1 billion), Azania Bank (Sh20.29 billion), Tanzania Commercial Bank (Sh15.14 billion) and DTB (Sh13.38 billion).

Higher profits can translate into increased lending capacity.

 Banks are more likely to provide loans to individuals and businesses, which can stimulate economic growth and job creation.

 They also mean that bank shareholders will earn dividends or expand the level of their investments in Tanzania.

Data analysed by The Citizen also shows that in the nine months to September 2023, the first tier banks extended credits amounting to Sh26.01 trillion, being 6.3 percent higher compared to the cumulative Sh24.46 trillion that they extended as credits during the same period in 2022.

Signalling their robust financial health, the banks in Tanzania’s positive trend is further bolstered by a concurrent decline in non-performing loans (NPLs).

Data analysed by The Citizen shows that collectively the average NPLs of the 13 lenders dropped from 5.3 percent to 4.67 percent during the comparative period.

Notably, some of the commercial banks have demonstrated the importance of effective risk management and sound lending practices within the sector.

While Citi Bank NPLs stood at 0 percent at the end of September, KCB Bank was also able to maintain at 1.69 percent, StanChart at 2.4 percent, PBZ at 2.59, NBC at 3.3 percent while NMB and CRDB also had an impressive 3.5 percent.

However, there are still some of the banks mitigating the challenge of NPLs above the regulatory recommended level of a not more than five percent of total gross loans.

Why the surge?

The CEO of some of the banks who spoke to The Citizen attribute the rise in profitability to internal initiatives which, they say, were being backed by a conducive business environment that allows businesses to thrive.

“This year’s performance reflects our bank’s unwavering commitment to excellence. The decline in NPLs reflects our commitment to prudent lending and risk management practices,” said KCB Bank Tanzania managing director Cosmas Kimario.

He said the surge in profits was testament to Tanzania’s sound macroeconomic fundamentals and an articulate regulatory framework, coupled with an improved business environment and a growing economy.

 “There is an improved creditworthiness for people as the economy grows so that is why even the loan recovery has improved.

 The business is active and banks like KCB have created several innovative solutions to fasttrack service delivery,” he said.

CRDB group chief executive officer and managing director Abdulmajid Nsekela said for his bank the remarkable Q3 2023 financial results can be attributed to a combination of factors, including its focus on Micro-Small-Medium Enterprises (MSMEs), special attention to women and youth, investments in digitisation and operational efficiency.

He said the bank also focused on the strategic lending to key sectors, business growth, and expansion in the new market coupled with the supportive policy environment.

 “These drivers have collectively propelled the bank to achieve impressive net profits, demonstrating its commitment to contributing to the economic growth and development of the country,” Mr Nsekela said.

NBC managing director Theobald Sabi, who doubles as chairman for Tanzania Bankers Association (TBA), said collective improvements in the business environment, pro-investment initiatives spearheaded by the government, and innovative banking solutions provided by financial institutions, coupled with the resilient performance of the Tanzanian economy, have substantially contributed to the industry’s profitability.

 “The Bank of Tanzania (BoT) has implemented several pivotal policies in recent years, particularly in response to the challenges posed by the Covid-19 pandemic.

 These measures include facilitating increased credit to the private sector and adopting accommodating monetary policies,” he said.

This he said includes the reduction of the discount rate from 7 percent to 5 percent per annum and the lowering of the statutory minimum reserves (SMR) requirement from 7 percent to 6 percent, which have effectively improved market liquidity.

Mr Sabi noted that the lenders have also transformed in creating services tailored to the market needs adding “…banks have significantly invested in digital financial services, extending their reach to more customers while simultaneously reducing operational costs,” Mr Sabi who doubles as the chairman of the Tanzania Bankers Association (TBA) said the government’s commitment to stimulating investment has boosted investor confidence and attracted foreign direct investment (FDI), positively influencing the banking system.

 “Furthermore, an improved business environment, marked by comprehensive regulatory reforms as part of the Blueprint for Regulatory Reforms to enhance the business environment, has fostered a conducive atmosphere for business growth,” said Mr Sabi.

And according to NMB Bank chief executive Ruth Zaipuna, the performance was a reflection of a methodical execution of the bank’s strategy which has continued to demonstrate robust business growth, sustained cost efficiency, and maintained good quality of the loan portfolio supported by a solid business momentum and a stable and accommodative operating environment.

“These solid financial results reflect a continued trust from our stakeholders and reaffirm our mission of being a catalyst for spurring the overall socio-economic development in the country,” said Ms Zaipuna.

Going forward, Ms Zaipuna exuded confidence that with the support from customers, the government, shareholders, key stakeholders and employees, 2023 will be another strong year.

Being a solid, sound and well well-capitalised entity, Ms Zaipuna said the focus ahead will continue to be that of driving revenue growth, ensure cost efficiency and optimising the balance sheet.

This should continue yielding better returns to shareholders, while simultaneously impact the community positively.