Tier-2 banks nearly triple total profit

Dar es Salaam. The collective profit posted by second-tier banks in Tanzania jumped by 192 percent during the first three quarters of this year.

The increase was driven by a vibrant economy, which was experiencing robust growth post-Covid-19.

The 21 banks analysed by The Citizen registered a collective net profit of Sh73.75 billion by the end of September 2023, up from Sh25.22 billion recorded at the end of September 2022.

The banks and their net profits in brackets include NCBA Bank (Sh16.48 billion), Equity Bank-Tanzania, (Sh13 billion), Tanzania Agriculture Development Bank (TADB) (Sh9.56 billion), Bank of Africa (BoA) (Sh8.77 billion), UBA (Sh6.91 billion), Mkombozi Bank (6.54 billion) and Ecobank (Sh4.7 billion).

Others are I&M Bank (Sh3.1 billion), Bank of Baroda (Sh2.13 billion), China Dasheng Bank (Sh1.92 billion), Finca (Sh1.53 billion), Maendeleo Bank (Sh1.3 billion), Bank of India (Sh1.28 billion), Access (Sh1.27 billion), Canara (Sh760.27 million), International Commercial Bank (ICB - Sh743 million).

Banks that reported net losses in their financials include Guaranty (Sh279 million), ACB (Sh316 million), Amana Bank (Sh1.1 billion) and TIB (Sh4.3 billion).

The most notable improvement was that of NCBA Bank, which was able to make a comeback from a Sh25 billion net loss in 2022 to record a Sh16.48 billion net profit in 2023.

NCBA Tanzania managing director Claver Serumaga said, “Our performance is indeed driven by the implementation of a turnaround strategy that is anchored on a new Target Operating Model (TOM).

“From these efforts, the Bank has generated an operating profit of Sh11.2 billion as compared to an operating loss of Sh861 million for the same period last year. On top of better operating profit, our recovery strategy on the written-off book has also yielded a better result as compared to the same period last year, all of these have contributed to better results as compared to the comparative period in the previous year.”

Speaking to The Citizen, bankers indicated that the performance of the entire industry was also offset by the supportive regulatory environment that encourages innovation, competition and financial stability.

Mr Serumaga said, “While our focus and realisation is driven by the key sectors of the economy, the interdependence of the sectors is paramount. We attribute our achievement to both overall growth of the economy as well as harnessing of the existing opportunities.”

He added that embracing digital technologies and promoting financial inclusion, Strengthening credit risk assessment, conducting comprehensive market research and leveraging customer insights as well as encouraging collaboration between banks, can lead to the development of innovative solutions, expanding access to financial services and driving sector-wide growth.

Mkombozi Bank chief Financial officer Vitalis Michael stated that the intensified cost optimization initiatives coupled with the good economic recovery of Covid-19 enabled the growth of banking activities in the third quarter of 2023.

He added that maintaining a strong balance sheet was possible due to the efficient internal strategies and good governance that were supported by the existing good business environment.

“We have also continued to strengthen and utilise the alternative banking channels such as the mobile and agency banking, providing easy access and convenience to customers which formed a good base for our non funded income growth,”he said.

Mr Vitalis noted that there were improvements in the other lines of non-interest income specifically forex and bancassurance and that the bank is well positioned-years ahead.

China Dasheng Bank head of finance Guydon Chihwalo said for 2023 the performance of the bank was led by strong risk management and prudent financial strategies.

“Going forward the prospects for the business to grow are high, as the economy still holds a positive trend coupled with enabling regulatory frameworks,” he said.

Mr Chihwalo said the only existing risk at the moment is the forex business as the country and the rest of Africa region grapple with the shortage of dollars.

For his part, Bank of Africa (BoA) managing director Adam Mihayo attributed the bank’s strong performance to a combination of factors.

He emphasised that this success is a result of continuous improvements in the business environment and the supportive fiscal policies being implemented by the country’s leadership, despite the challenging global economic landscape marked by delayed recovery, exacerbated by increasing core inflation and tighter monetary policies worldwide.

”Bank of Africa has made a deliberate commitment to enhance its support to the markets in which we operate, with a special focus on small and medium enterprises (SMEs) which have exhibited remarkable growth this year,” Mr Mihayo said.

“Our ongoing investments in services, the enhancement of our digital channels such as B-mobile, the introduction of Agency Banking, and the upgrade of Internet banking have all made significant contributions to our growth.”

Mr Mihayo further highlighted Tanzania’s strategic advantages, including its favourable geographic location, abundant natural resources, and stable political environment.

He said in light of these factors, BOA is committed to playing a leading role in supporting a wide range of private and public investment initiatives as it continues to execute its strategic plan.

High NPLs

However, amidst this celebration of prosperity, there was a lingering challenge that couldn’t be ignored.15 of the analysed 21 mid-sized banks were still grappling with high non-performing loans (NPLs) above the regulatory threshold of five percent.

The highest being ICB at 45.1 percent, followed by UBA at 27 percent, TIB at 22 percent, I&M at 21.58 percent, Equity at 17 percent, Finca at 15.8 percent, NCBA at 11.1 percent and DCB at 10.8 percent.

Banks that had NPLs below the threshold include Canara at 0.25 percent, China Dasheng at 0.7 percent, BOA at 1.63 percent, Ecobank at 2.6 percent, Baroda at 2.67 percent and Guaranty at 2.96 percent.