Tanzania's major banks post good Q2 results

Large banks continued to make impressive profits in this year’s second quarter, with some capitalizing heavily on the shilling fluctuation.

However, on the other hand, Barclays Bank and National Bank of Commerce (NBC) registered losses as a result of bad loans.

The figures for second quarter for Barclays and NBC show that the two banks NPLs are hovering around 10 per cent which is twice the industrial rate threshold.

So far, CRDB bank tops all the banks in term of profitability in the second quarter after posting a group pre-tax profit increase by almost 60 per cent to 37.9bn/-.

Standard Chartered Bank posted a pre-tax profit of 15.1bn/- but was less by some 13 per cent compared to the last year’s same quarter of 17.4bn/-.

Exim Bank made a pre-tax profit of 13.18bn/- from 9.5bn/- thanks to net interest income that climbed 30 per cent to 16.3bn/-.

Citibank, with a single branch in Dar es Salaam, generated a pre-tax profit of 7.5bn/- up from 6.4bn/- , which is near to Bank M’s 5.3bn/- and Diamond Trust Bank.
However other two banks, NBC and Barclays posted a negative profit. Barclays generated a negative 6.2bn/- in three months ending June compared to 22m/- made in the same period last year.

Both banks are haunted by bad debts, where in the quarter NBC set aside 2.6bn/- and wrote off 2.7bn/- worth of bad debt to impact negatively on its profit.

Barclays for impairment losses on loans and advances set aside 10.7bn/-, which is similar to the net interest income generated from loan portfolio of 10.8bn/-.

In banking, a credit risk provision for loan impairment is established if there is objective evidence that the bank will be unable to collect all amounts due on a claim according to the original contractual terms.

Most banks make a provision for that amount, which does not necessarily mean it is a direct loss.

While the big banks are battling to keep their positions on the list of larger banks in term of profitability and balance sheet, cooperative banks are also coming up well, reporting good results on the quarter.

Kagera Cooperative Bank came out of the red to post a pre-tax profit of 143m/-. On the other hand Mwanga Community Bank profit slowed down to 30m/- from 85.2m/- of last year same quarter.

The smaller banks in term of balance sheet are still struggling. The BancABC made pre-tax profit of 752m/- from a loss of 2.5bn/- thanks to loan portfolio revenue that went up to 6.6bn/- from 1.5bn/-. While Access Bank made a deep pre-tax loss of 474m/- from a profit of 397m/-.

Access, a lower and middle income bank, loss was the result of written off bad debt totaling 727m/-, fund set aside for probably losses of 1.06bn/- and salaries and benefits expenses of 8.6bn/-.

Despite setting aside a huge sum for impairments, the bank NPLs stands at 4.8 per cent below the industry rate of 5.0 per cent. Also Access Bank salary expenses shot up after the bank workforce jumped to 873 from 612 staffs while branches increased from 10 to 12.

The shilling fluctuation benefited the profitability of the banks in the second quarter as well. The shilling in the first half of this year had depreciated by around 20 per cent to historic low level of 2,400/- a US dollar.

Since the shilling is a commodity, the fluctuation of the unit prices, if well analysed may benefit the banks either positively or negatively.

For instance, the Standard Chartered Bank in three months ending June, generated 13.1bn/- compared to 3.1bn/- of similar period last year when the fluctuation was limited.

CRDB bank also made 7.7bn/- against 5.7bn/- of last year second quarter, Barclays generated 3.3bn/- from 1.3bn/- and Citibank made 4.8bn/- compared to 3.8bn/- while Exim Bank generated a gain of 3.1bn/- from 2.2bn/-. But all are not rosy for the foreign currency dealings.

International Commercial Bank made a loss of 157m/- compared to gain of 106m/-. While BancABC gain retracted to 43m/- from 93m/-.

The good performance of most of the banks comes at a time when the Bank of Tanzania (BoT) waived 80 per cent loan to deposit ratio restriction to no limit.
The waiver, instituted last year, aims to enable banks to extend more loans to the society restriction-free.

The BoT Director of Banking Supervision, Mr Agapiti Kobelo, told Daily News that instead of restriction banks are now closely monitored on a daily basis.

Under the old system, the banks had to deposits to 20 per cent of their total deposits to the central bank, which remains locked for defaulting purpose.

Tanzania has some 55 banks, of which 34 are commercial banks and one development bank.
Source: Daily News, reported by Abduel Elinaza, from Dar es Salaam, Tanzania
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