Record profits beckon as banks' mid-year performance rise

Dar es Salaam. The first half of the 2022 was good for commercial banks in Tanzania as most of them saw their profits rising to record levels, sending a bullish message that the sector’s net profit will cross the Sh1-trillion mark this year.

With an improved customer and investor confidence in Tanzania’s economy, supported by the government’s encouraging and predictable business environment, most of the country’s lenders went home with lucrative financial results during the first half of 2022.

In fact, a number of the lenders more than doubled their half year cumulative profits compared to what they registered during a similar period last year.

In what sends a message that the business environment was improving as the economy recovers from the Covid-19 doldrums in the wake of government’s stimulus efforts, the country’s two largest lenders registered a combined net profit that is far much higher than the net profit for the entire banking sector in 2017 and 2018.

For instance, the country’s 11 largest lenders went home with a net profit of Sh262.778 billion in 2018.

But on an interesting note, NMB Bank Plc’s net profit for the first six months of the current calendar year rose to Sh208 billion, a 53 percent rise from Sh135.5 billion that was registered during a similar period last year. This means that the amount in profit, registered by NMB Bank Plc during the first half of 2022, was slightly higher than the annual net profit of Sh206 billion that the lender went home with in 2020.

On the other hand, CRDB Bank Plc’s net profit jumped to Sh174.04 billion during the first six months of 2022, from Sh88.6 billion during a similar period last year. Likewise, this was higher than an annual net profit of Sh165 billion that it registered in 2020.

On the third slot was Standard Chartered Bank which saw its net profit rising to a staggering Sh52.03 billion during the first half of 2022, up from only Sh11.21 billion in first half of last year.

NBC Bank’s net profit for 2022 first almost doubled to Sh34.14 billion from Sh17.38 billion while that of Exim Bank almost tripled to Sh22.6 billion in 2022 first half from Sh7.67 billion in similar period last year.

Stanbic Bank’s trashed Sh4.68 billion loss for last year’s first half to garner Sh14 billion in net profit. Azania Bank’s cumulative profit also rose multiple times from only Sh685 million to Sh13.37 billion while KCB Bank stood high with a Sh10 billion cumulative net profit, from Sh7.6 billion. Diamond Trust Bank’s net profit increased to Sh6.77 billion from Sh4.25 billion while Tanzania Agricultural Development Bank (Tadb) saw its net profit rising to Sh4.8 billion from Sh4.69 billion.

According to the NMB Bank Plc chief executive officer (CEO), Ms Ruth Zaipuna said the performance reflects solid business momentum, strong efficiency gains, and significant improvements in the loan portfolio quality.

“Strong revenue momentum was sustained during the period, with a total revenue increase of 21 percent from previous year to Sh562 billion, highlighting exponential growth in both net-interest income and non-funded income lines which grew by 17 percent and 32 percent, respectively,” she said.

The bank’s efficiency ratio, she said, improved further during the first half of 2022 with cost-to-income ratio (CIR) reducing further to 42 percent as at end of June 2022 compared to 47 percent in the same period in 2021, well within the 55 percent regulatory benchmark.

NPLs closed the first half at 3.8 percent, up from 4.3 percent recorded in the same period last year.

“We had a promising start to the year as we continue to deliver consistently to our shareholders and our communities. The bank’s revenue continues to grow due to enhanced customer value propositions. Half year performance is encouraging and reflects the good progress along our strategic initiatives and underlines our strong capabilities and commitment to remaining relevant to our customers,” she said.

And, the CRDB Bank Plc managing director, Mr Abdulmajid Nsekela said the private sector prospects in Tanzania remain promising, buoyed by the positive business climate and the ability of the banks to fund growth through credit, as data according to the central bank shows in the past half, credit to the private sector grew by 13.4 percent.

“The continued bilateral (and multilateral) engagements being championed by the government continue to bode well with regional trade, especially within the East African Community (EAC). The diplomatic relations in the Far East have also had a resultant benefit to the business community and we are confident that this will continue to yield positive results,” he said.

Being a top lender, said Mr Nsekela, CRDB plans to focus on small and medium enterprises (SMEs) especially along the trade, construction and agriculture value chains, after seeing that these sectors are driving growth in the economy.

“Our strategy is address capital challenges among the various enterprises, understanding the valuable role they play in enabling achievement of the country economic transformation ambitions,” said Nsekela.

As for the Standard Chartered Bank Tanzania CEO, Herman Kasekende, the bank’s financial performance for the first half of 2022 reflects what he termed as disciplined strategy execution.

“Our profit before tax grew by over 300 percent year-on-year with a strong underlying business momentum…..In driving efficiency in line with our strategic priorities, we achieved a cost to income ratio of 32.1 percent benchmarking to the regulatory requirement of 55 percent,” he said.

NBC Bank Managing Director, Theobald Sabi, said that Tanzania’s steady and predictable business environment - coupled with the economy bounce back from the Covid-19 pandemic- sent a positive message to members of the private sector, resulting in improved productivity.

NBC Bank vigorously expanded its customer base across the country’s breadth and width, reaching the unbanked segments through a hybrid combination of traditional brick-and-mortar branches and digital banking platforms.

“We have done quite well in the credit provision to all segments; we have also invested effectively in digital banking platforms to enhance the convenience and experience of our customers,” he said.

Speaking to The Citizen, the Managing Director KCB Tanzania,  Mr Cosmas Kimario said the industry remains strong as demand to invest and do business in Tanzania grows, coupled with reassuring policies that are set by the government.

“Economic activities such as transportation and tourism have had a good recovery. With the continued efforts to get rid of Covid-19, it is possible to see the industry post a high growth,” he said.

Mr Kimario said in terms of operations, in recent year’s lenders have also shifted to digital in an effort to boost their efficiency and eventually, post good results.

The Tanzania Commercial Bank CEO, Mr Sabasaba Moshingi concurred with his colleagues, stressing that Tanzania’s banking sector holds a good trajectory, noting that while the peril of the Covid-19 pandemic are put behind, businesses and investors have continued to put confidence into the sector and economy at large.