Tanzania's mid-sized banks' first quarter profits jump

 

By Josephine Christopher

Josephine Christopher is a business reporter for The Citizen and Mwananchi newspapers.

Mwananchi Communications Limitted

Summary

·         Analysed banks – which have asset values below Sh1 trillion but above the Sh100 billion in value – indicated a sharp increase in profits compared to the numbers recorded during the same period in 2022

Dar es Salaam. Tanzania mid-sized banks have reported stellar performance in the first quarter of the

year 2023, with profits rising by more than 126 percent.

Analysed banks - which have asset values below Sh1 trillion but above the Sh100 billion in value - indicated a sharp increase in profits compared to the numbers recorded during the same period in 2022.

The surge in profits is attributed to several factors, including implementing cost-cutting measures, higher lending activity and improved asset quality.

The banks that were put under review by The Citizen were NCBA Bank Tanzania, Maendeleo Bank, Bank of Baroda, Amana Bank, China Dasheng Bank, UBA Bank Tanzania, DCB Commercial Bank, Equity Bank, Bank Of Africa (BoA), Ecobank, I&M Bank, Mkombozi Bank, Mwanga Hakika Bank, and Tanzania Agriculture Development Bank (Tadb). The 14 banks recorded a total net profit of Sh24.48 billion in the first three months this year compared to Sh10.82 billion the same banks totalled during the same period in the preceding year.

The net profits of these commercial lenders in the country came from the improving interest income and non-interest income.

Data shows that during Q1 while the interest income of the 14 banks grew to Sh126.15 billion from Sh111.56 billion (13 percent); other avenues of the non-interest income grew at an even higher rate by 16 percent to Sh43.52 billion from Sh37.46 billion.

Non-interests income includes foreign currency dealings, dividend income, other operating incomes, and also revenue from fee income that they charge for their products and services that include wealth management advice, checking account fees, overdraft fees, ATM fees, interest, and fees on credit cards. 

Speaking to The Citizen, Bank of Africa (BoA) managing director Adam Mihayo the country’s banking sector is closely tied to the overall health and strength of the country’s economy.

He said the strong economic performance the country has posted despite all global challenges has created more business opportunities and an increase in investments.

This increased activity creates more opportunities for banks to lend money and provide financial services to businesses and individuals.

“For us at Bank of Africa, we have made a conscious decision to expand more support to the markets in which we operate, especially the small and medium enterprises (SME). The good policy environment and economic prospects have to a large extent pushed the performance,” said Mr Mihayo.

“Credit extension to the private sector has overall improved. Going forward there are also opportunities for banks to innovate and improve their services to meet the changing needs of their customers such as the cashless economy,” he said.

Mkombozi Bank chief financial officer Vitalis Michael said one of the key strategies that helped the bank’s performance was cost minimization and improved efficiency in service delivery especially through digital channels.

He said the integration of the digital solutions expanded the customer base and the number of transactions resulting in more revenue and deposits to the bank.

“Interest income improved but more growth was seen through the non-interest income segments such as forex and trading,” said Mr Michael.

He also noted that the bank was able to maintain its levels of non-performing loans (NPLs), which currently stands at nine percent.

“We have worked quite significantly on credit origination and administration, moving from 20 percent in 2019 to the current 9 percent, and we are geared towards 5 percent and below,” he said.

The Citizen analysed NPLs is still a challenge to mid-sized banks as only six banks out of the 14 under review met the five percent and below threshold.

NCBA managing director and chief executive Claver Serumaga said is the performance is anchored on a new Target Operating Model (TOM) under which the bank was set on a new strategic path to become a significant player in the Tanzanian economy by focussing on key growth sectors of the economy.

He said  On top of better operating profit, NCBA recovery strategy on the written off book has also yielded a better result as compared to the same period last year, all of these has contributed to better Quarter 1 results as compared to the comparative quarter in the previous year.

“The bank expects to continue with this performance for the rest of the year as we continue to implement our strategy to manoeuvre around the existing global challenges,” he said.