Three banks each have over 50pc in bad loans

DAILY NEWS Reporter

THREE banks have more than 50 per cent of non-performing loans ratio in this year’s quarter one as banks loan repayment default rate soars to record high.

Efatha Bank, linked to Efatha ministry and foundation, has the highest nonperforming loans ratio in this year’s quarter one so far at 63 per cent increased by almost five times from the same period last year. The industry benchmark for NPLs ratio is pegged at five per cent, however experts said on average in Q1 NPLs ratio is between 9.0 and 10 per cent.

During the same quarter, the bank posted a profit loss of 23m/- from a net profit of 12m/- in quarter-to-quarter. Efatha is followed by EconBank Tanzania after reporting NPLs of 57 per cent in Q1, this year up from 38 per cent in similar quarter last year.

EcoBank made a loss of 4.75bn/- up from 1.26bn/-, in the said quarter. Tanzania Women’s Bank, which CAG suggested central bank intervention, reported NPLs ratio of 52 per cent, which also went up from 43 per cent of last year’s Q1.

The Women’s Bank, however, profit losses eases after posted a loss of 107m/- a better level in Q1 compared to a loss of 473.4m/- in Q1 last year. TIB Development Bank was also among financial institutions which posted high NPLs.

The bank NPLs increased to 38 per cent from 34 per cent. Due to high NPLs posted a pretax profit loss of 996m/- from a profit of 4.49bn/-. BancABC also was among those which reported high NPLs at 31 per cent slightly going up from 30 per cent.

Another was Commercial Bank of Africa that reported an NPLs ratio of 23 per cent however down from 28 per cent of previous quarter. Mwanga Community Bank also reported high NPLs of 21 per cent up from 18 per cent.

TIB Development Bank, economist Dr Hildebrand Shayo said high NPL levels ultimately have a negative impact on bank and lending to the economy affecting balance sheet quality, profitability and capital.

“…Based on the first quarter published audited financial give the impression that bank’s risk controls for loans are unsuccessful because the banks own a disproportionate levels of bad loans,” Dr Shayo, providing personal views as an economist, told the `Daily News.’

He said to address the problem of rising NPLs banks, investors and borrowers need to work together and be creative in finding solutions to the problems they collectively face. “There is no one size fits all approach. Different banks pursue different strategies in relation to different types of loans,” Dr Shayo said.

Nevertheless, most financial statements posted by the banks so far show that many banks had NPLs of between 7.0 per cent and 15 per cents. Those which are in 7.0 to 15 per cent bracket include CRDB Bank (14 per cent), Azania Bank (13.4 per cent), First national Bank (13 per cent), Barclays (11.9 per cent), and NIC Bank (10 per cent).

Others are Kilimanjaro Co-operative Bank (9.2 per cent), Standard Chartered Bank (9.1 per cent), NBC (8.5 per cent), Access Bank (7.9 per cent), Akiba Commercial Bank (7.9 per cent), and KBC (7.6 per cent), Banks which their NPLs were below the benchmark of 5.0 per cent include Diamond Trust Bank (3.3 per cent), Citibank (4.6 per cent), NMB (4.6 per cent), Maendeleo Bank (4.8 per cent), and TIB Corporate Bank (5 per cent).

In establishing how to deal with a problem loan, banks, now 59 in total, have tightened their credit terms as bad loans top 1.98tri/- in the stock of credit in the economy reaching 20.89tri/-.