Mid-sized banks to watch as sub-sector recovers

By Josephine Christopher

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Dar es Salaam. The year 2021 was generally good to a number of mid-sized lenders as available data show that some of them exhibited resilience and steady growths

across a number of performance parameters in 2021 as the sector partially recovers from the Covid-19 pandemic.

This group includes lenders with asset levels ranging from slightly below Sh1 trillion and above Sh200 billion, majority being subsidiaries of large regional banks.

They include: KCB Bank Tanzania, Absa Tanzania, Bank of Africa (BoA), Equity Bank Tanzania, I&M Bank Tanzania, Bank of Baroda, Mkombozi Bank, BancABC, Amana Bank, NCBA Bank Tanzania, People’s Bank of Zanzibar (PBZ) and Habib Bank.

The Citizen’s probing eye into the financial statements for 10 of the 12 mid-sized lenders reveal that it was actually four banks that recorded breaking annual gains in terms of improved asset size and a drop in levels of Non Performing Loans (NPLs).

KCB Bank Tanzania, Absa Tanzania, Bank of Africa (BoA) and Equity Bank Tanzania registered splendid growth rates in profitability in 2021. KCB Tanzania saw its net profit rising to Sh15.64 billion in the year to December 2021, from Sh4.44 billion that was recorded in the year ending December 2020. The bank also cut its NPLs levels from six percent in 2020 to only two percent in 2021. This is far better than the regulatory recommended level of at five percent.

KBC Bank Tanzania’s assets rose to Sh836.27bn in 2021, from Sh721.56 billion in 2020 while its customers’ deposits improved to Sh555.78 billion from Sh470 billion of the previous year.

Speaking to The Citizen, the KCB Tanzania managing director Cosmas Kimario said part of the bank’s success could be explained by its establishment of customer-centric strategies, technological innovation in service delivery and discipline in issuance of loans.

“We have made significant technology investments and transformed our service delivery in facilitating seamless access, penetration and efficiency,” he said.

This he says was also attributed to the change in customers’ behavior as people now prefer fast, simple and efficient services without spending hours at the bank, which in turn improved transactions in services like internet banking.

The other bank to watch is Absa Tanzania. The lender’s profit after tax advanced by 1,875 percent to reach Sh9.4 billion in 2021 from a loss of Sh532 million in 2020.

The bank’s financial statement shows that its earnings have swiftly advanced from a loss of Sh532 million in 2020 to a profit after tax of Sh9.4 billion in 2021.

Apart from growing its customers’ deposits, Absa’s impairment on loans dropped by 30 percent in 2021 while its NPLs went down to 7.1 percent of total gross loans from 8.9 percent in 2020. Managing director Abdi Mohamed attributes the performance to partial recovery of the economy from the negative effects of the Covid-19 pandemic (see related story on page 8).

“The 2020 reported loss was mainly contributed by the negative effects of the Covid-19 pandemic that affected most of the sectors in the economy which impacted our bank’s financial performance in terms of decreasing revenues and increased loan impairment losses,” Mr Mohamed said.

The Bank of Africa (BoA) – which is under a new management - improved its annual profit levels to Sh4.23 billion from Sh3.22 billion of the preceding year. The lender’s asset value and deposits also improved while NPLs decreased 6.9 percent in 2021 from 7.8 percent in 2020.

Another lender with a regional presence, Equity Bank Tanzania, had also its share of impressive margins for the last year recording a cumulative net profit of Sh3.3 billion from a net loss of over Sh5 billion.

Though still high, Equity was able to cut down on its NPLs to 23 percent from 32.9 percent, while deposits and asset values also improved.

I&M Bank Tanzania, Bank of Baroda and Mkombozi Bank remained profitable in 2021 though their profitability levels declined slightly.

Though its net profit level declined by 32 percent to Sh3.97 billion from a net profit level of Sh5.8 billion in 2020, I&M Bank’s assets improved to Sh584.64 billion from Sh511.73 billion in 2020 while deposits rose from Sh356.61 billion in 2020 to Sh436.71 billion in 2021. The Bank of Baroda’s net profit went down to Sh2.12 billion in 2021 from Sh4.24 billion that was recorded in 2020 while that of Mkombozi Bank was recorded at Sh1.14 billion last year from Sh2.5 billion in 2020. Though it remained unprofitable, Amana Bank managed to subdue its losses significantly to only Sh1.48 billion in 2021 from Sh4.8 billion in 2020.

Investment analyst from Tanzania Securities Limited Mr Ombeni Uhuru said the industry’s good performance was mainly coupled with economic growth, improved private sector lending and stashes of investments into government securities.

“These mid-sized banks shared the same advantages as the big banks and many fared well in 2021. We also have good prospects for 2022 as we expect improvement in all aspects of asset, profitability and liquidity,” he said.

BancABC and NCBA were still in losses.

Addition Report by George Helahela