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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