CRDB shares hit lowest level in 14 months

CRDB Bank shares hit the lowest level in the last 14 months due to non-performing loans that dashed long term investors' hope of cashing on good yields.

The bank share price which was boosted mainly by foreign participants fetched 110/- a stock after dropping by 10.57 per cent on Monday,a single day slide since the beginning of the year.

Tanzania Securities Chief Executive Officer, Mr Moremi Marwa said that CRDB Bank has been facing a share price movement at the bourse in the last three years due to bad loans.

"Investors  mainly institutions were hoping that non-performing loans would disappear from the bank's books  this year but the situation has remained the same," Mr Marwa said yesterday.

"The bank allocated 5bn/- in this year's first quarter to offset the debts and this shows that the problem has not been solved," he said. 

According to him, the market is flooded with the bank's shares because institutions and foreign investors might have made their own analysis after seeing a gloomy picture based on the first quarter financial statement.

"Short term investors who are normally driven by dividends are weighing the impact on the share movement. And you should know that institutions are driving the bourse," Mr Marwa said,ruling out dividends as the fundamental problem.

In the last three years,the bank wrote off bad debts worth over 100bn/- due to the global financial crisis.

This forced the government to introduce a 1.3trn/- economic rescue plan to support banks especially those which loaned the cotton sector.

However, CRDB said that the money it received from the stimulus package between 2009 and 2010 was inadequate to clear its balance sheet from bad debts as a result of a non performing cotton industry in 2008.

The bank, which is the largest in terms of assets, deposits and loan portfolio, said it issued loans to the cotton sector worth about 70bn/- but received only 18bn/-, leaving its books with huge bad debts.

The bank's Managing Director, Dr Charles Kimei, said a fortnight ago that it only anticipates to recover 30 per cent of the said total amount.

"The  debt is huge but but we are still positive we will recover the money", he told reporters  during investors, brokers, and editors forum on the share price issue.

According to the share price valuation made by Dhow Financial a month ago, the fair value of the stock is 260/- a piece but still it has kept on falling to trade at 110/- as of on Tuesday.

Further, Mr Marwa said despite the investors shunning CRDB stocks, earnings per share (EPS) stood at 17/30 at the end of last year while dividends offered rose from 2/- in 2008 to 9/- in 2011.

"The problem is individual stock investors who are driving the market.Small buyers cannot move prices as their demand is very low," Dhow Financial Managing Director Prof Mohamed Warsame said earlier.
Source: The Daily News,, reported by Abduel Elinaza

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