Five most profitable banks in East Africa amid sectors growth

Read: Tanzania’s two largest banks make close to Sh1 trillion in net profit

According to the financial statements for the first quarter of the current calendar year, the top five most profitable banks in East Africa come from Kenya and Tanzania, with the latter being represented by three banks.

The two Tanzanian banks joined KCB Group, Equity Group, and Co-operative Bank of Kenya on the list of top-performing lenders by their net profit levels.

Leading the pack is Kenya’s KCB Group, which posted a net profit of Ksh16.06 billion ($122.59 million), a 69 percent increase from Ksh9.5 billion ($72.51 million) in the first quarter of last year (2023). The Group has operations in Tanzania, Rwanda, Burundi, South Sudan, Kenya, Uganda, the Democratic Republic of Congo (DRC) and a representative office in Ethiopia.

The lender is followed closely by Equity Group, which posted a net profit of Ksh15.39 billion ($117.48 million), a growth of 25.1 percent from Ksh12.3 billion ($93.89 million).

The group operates in Kenya, Uganda, Rwanda, the Democratic Republic of Congo, South Sudan, and Tanzania.

An official statement from the bank noted that the impressive first-quarter performance underscores the bank’s resilience and strategic adaptation to challenging economic conditions, setting a positive tone for the remainder of the year.

“The recovery momentum is strong after accepting and adapting to the new normal of operating in an environment characterized by volatility, uncertainty, complexity, and ambiguity. An environment defined by high inflation, interest rates, and volatile currency exchange rates,” Equity Group’s managing director, Dr James Mwangi, said in part.

Tanzanian lender NMB Bank Plc took third place in the ranking with a net profit of Sh160.36 billion, equivalent to $61.69 million, as per the average exchange rates by the Bank of Tanzania (BoT) for June 2, 2024.

The profit was a 30 percent increase from Sh122.75 billion ($47.22 million) posted in Q1 of the preceding year.

NMB Bank’s CEO, Ms Ruth Zaipuna, said on Wednesday that the 2024 first quarter results signal the disciplined execution of the bank’s medium-term plan (2021-2025), which maintains the growth momentum amidst thriving macroeconomic fundamentals in Tanzania.

She said NMB’s first-quarter performance was fuelled by robust balance sheet growth and prudent risk management within a resilient economy and a healthy banking sector.

During the first quarter, NMB Bank experienced significant customer growth, with over 300,000 new customers joining the bank in the first quarter, more than 80 percent of whom onboarded digitally.

“We remain dedicated to investing in our people to build a future-ready bank and are making substantial progress on key strategic initiatives, including upgrading our technological base, enhancing governance and compliance, and advancing our sustainability agenda,” Ms Zaipuna said.

The Co-operative Bank of Kenya comes in fourth with a net profit of Ksh6.6 billion ($50.99 million).

With a net profit of Sh127.5 billion, equivalent to $49.05 million in the first quarter, Tanzanian lender CRDB Bank Plc rounds up the top five on the list. Its profits increased by 41.3 percent from Sh90.21 billion ($34.71 million). This growth was driven by a net interest income of Sh192 billion, a 9.7 percent increase from the previous year.

CRDB Group’s CEO, Mr Abdulmajid Nsekela, said recently that the performance demonstrates the lender’s continued strength and good momentum in implementing its new medium-term strategy for 2023–2027.

“The bank intends to maintain this momentum by investing in growth opportunities within the regional investment landscape and leveraging its capabilities to invest in key markets and sectors to potentially bolster this growth,” Mr Nsekela said during the release of the first quarter financial results in April this year.

Prof Haruni Mapesa of Mzumbe University said the strategic advantages and supportive regulatory environment have contributed to the success of NMB and CRDB banks in Tanzania. He said these banks have a long-standing history and a widespread presence across Tanzania, making their retail banking business substantial compared to other banks.

“Tanzania’s financial policies also support a favourable banking business environment. The regulation under the Bank of Tanzania (BoT) has been stable and effective, providing an opportunity for these banks to thrive,” he said.

“NMB and CRDB banks have significantly benefited from their strong connections with the government. Many government transactions, such as salary payments, are processed through these banks, which supports the growth of their businesses,” he added.

Prof Mapesa said these banks have distinguished themselves by launching various financial products, such as special bonds and listing on the Dar es Salaam Stock Exchange (DSE).

Vertex International Securities Limited’s capital markets manager, Mr Ahmed Nganya, said on the back of strong results, the financial counters, especially NMB and CRDB, continue to attract investors’ interest, driving weekly volume and price movement.

“We foresee a continuation of this trend as we anticipate a strong second quarter for both banks,” Mr Nganya told The Citizen.

In April, CRDB Bank announced an approved dividend of Sh50 per share to its shareholders in respect of the financial year ending December 31, 2023, which was an increase of 11 percent compared to the Sh45 that the shareholders received per share in the year 2022.

NMB Bank, on the other hand, announced on May 15, 2024, that its directors are proposing a dividend payment of Sh361.18 per share out of the 2023 profits, an increment of 26 percent from the Sh286 per share that was approved for the year ended December 2022.