Profits dwindle but Tanzania bankers still upbeat

Dar es Salaam. Profits for some big banks dwindled during the first half of the current calendar year as they work to tame high levels of non-performing loans (NPLs). The banking sector has found the going tough during the past two years.

The sector registered a total of Sh426 billion in net profits during the 2014 calendar year. The amount rose to Sh438 billion in 2015 but dropped to Sh423 billion and Sh286 billion in 2016 and 2017, respectively.

And, in what would indicate that the woes are not yet over, some major banks reported further declines in profits during the first half of 2018.

NMB, CRDB, Standard Chartered, Exim, TPB are some of the entities that registered declining profits during the first half of 2018.

NMB Bank, currently the most profitable bank in the country, saw its net profit dropping to Sh66.8 billion between January 1 and June 30, 2018 from Sh76.2 billion during a similar period last year.

It however managed to reduce its NPL to total gross loans ratio from 6.6 per cent as of March 2018 to 5.0 per cent in June 2018.

Some top bankers say high levels of NPLs have had a dire impact on their profits.

“The main reason for the drop in operating profit during the period is the write off on NPLs that the bank has had to make in line with the new regulatory requirements,” Standard Chartered Bank Tanzania chief executive Sanjay Rughani told The Citizen. Standard Chartered Bank’s net profit dropped to Sh12.6 billion during the first half of the current calendar year from Sh19.5 billion during a similar period last year.

NMB Bank chief executive Ineke Bussemaker shared Mr Rughani’s sentiments.

“The profit declined due to growing loan loss impairment…the bank’s loan loss impairment for the half year grew from Sh25 billion in 2017 to Sh41 billion in 2018,” she said.

The two bankers however remain optimistic regarding the sector’s fortunes going forward.

“We remain confident that our strategy and plans will ensure we build better momentum for growth and progress in the second half of 2018 and in the future,” said Mr Rughani.

With one of the lowest NPLs at sector level, Ms Bussemaker believes the future remains bright only through reduction of operating expenses and growing revenues by introducing more digital products and services.

As for CRDB Bank, the half year net profit dropped to Sh32.6 billion in 2018 from Sh39.6 billion in 2017.

Like NMB, CRDB also managed to cut its NPLs from 14 per cent in March 2018 to 13.4 per cent in June.

TPB, which received customers, employees, assets, and liabilities from the then Twiga Bancorp (which was placed under statutory management by the Bank of Tanzania since 2016) in May, saw its NPLs rise to 8.35 per cent in June 2018 from 5.05 per cent in March 2018. Its net profit also dwindled by 48.6 per cent to Sh5.3 billion during the first half of 2018 from Sh10.9 billion during a similar period last year.

Exim Bank also saw its net profit decline to Sh12 billion for the entire first six months of the current calendar year from Sh13.9 billion during a similar period last year. Its NPLs however rose to 9.67 in June 2018 from 8.95 per cent in March 2018.