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,http://dailynews.co.tz, reported by Abduel Elinaza
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