Banks steadily stabilising

Dar es Salaam. The banking sub-sector is finally out of the doldrums, with several parameters pointing to an improving trend despite uncertainties posed by new accounting rules.

The improvement symbolises a positive development for a sub-sector that has been wallowing in high levels of non-performing loans (NPLs) which resulted in reduced profit levels in 2016 and 2017. But – in a positive development that should see shareholders ‘wearing’ broad smiles – a number of the commercial banks which published their financial statements yesterday showed an improvement in profits, while also reducing both the amounts set aside as impairment losses on loans and advances, as well as NPLs.

In the event, NMB Bank Plc, CRDB Bank Plc, TPB Bank Plc, KCB Bank Tanzania and TIB Corporate Bank were among the financial entities whose profits rose in 2018, compared to 2017.

Several other banks – including DCB Commercial Bank – managed to come out of loss-making in 2017 and registered profits in 2018. DCB Commercial Bank – which is listed on the Dar es Salaam Stock Exchange (DSE) – leapfrogged from a Sh6 billion loss in 2017 to come out with a clean sheet in 2018, netting a profit of Sh2 billion!

With only 0.3 per cent, Standard Chartered Bank Tanzania registered the lowest NPL-to-total gross loans ratio in the market, even as its net profit dropped to Sh19.8 billion in 2018 down from Sh39.5 billion in 2017.

Similarly, Barclays Bank Tanzania, whose NPL to total gross loans ratio stood at only 3.3 per cent, saw its net profit going down from Sh13.333 billion in 2017 to Sh8.4 billion last year.

Also, the net profit for Stanbic Bank dropped slightly, to Sh17 billion from Sh19 billion in 2017.

Analysts are of the view that the performance generally underscores the fact that, after going through roiled waters in the past two years, the commercial banks changed tack, whereby they made their products and services more readily accessible to Tanzanians. “They have generally shifted from relying on government securities to actually extending their services to Tanzanians –thanks largely to the regulator’s control and supervision mechanisms,” an expert in Economics and Finance from the College of Business Education, Dr Dickson Patory, told The Citizen yesterday.

The manager for Licensing and Operational Review in the Directorate of Financial Sector Supervision at the Bank of Tanzania (BoT), Mr Frank Aminiel, told The Citizen that the outcomes portray the image that financial institutions were abiding by the regulator’s directives regarding setting up NPL strategies, including a permanent loans recovery function.

“Further, the banks were asked to conduct independent reviews to identify internal control weaknesses in their lending systems – and, thereafter, fill those gaps, while also enhancing loaning analyses by effective use of credit reference systems and improve analyses of micro and macroeconomic factors,” he said.

Bankers say that, although notable improvement has been seen as the financial institutions continue to settle with the new reforms that have been implemented in the sector, implementation of a new accounting standard – the International Financial Reporting Standard-9 (IFRS-9) – remains a major challenge. “We have seen some signs of positive development. However, as the final accounts are published, the impact of the IFRS-9 accounting policy, and the write-off requirements for NPLs, will also have impacted the industry’s performance,” the deputy chairman of the Tanzania Bankers Association (TBA), Mr Sunjay Rughani, told The Citizen yesterday. He said the 46 TBA members would continue to look at opportunities that are aligned with national priorities.

In a nutshell, the financial statements published yesterday show that CRDB Bank’s net profit rose by a cool 127.8 per cent to reach Sh70.183 billion in 2018, up from the Sh30.809 billion made in 2017.

NMB Bank Plc’s net profit rose from Sh93.4 billion in 2017 to Sh106.137 billion in 2018.

TPB Bank Plc – which saw its profit dwindling and NPLs rising when the government merged it with its two underperforming entities (Twiga Bancorp and Tanzania Women’s Bank) – also seems to have closed the chapter on its struggling last year. In the event, its NPL-to-total gross loans ratio dropped from 12.87 per cent on September 30, 2018 to a mere 6.92 per cent on December 31, 2018.

Also, the bank’s net profit rose from Sh12.8 billion in 2017 to Sh14.5 billion last year.

KCB Tanzania emerged as one of the best performing banks after its net profit jumped by 5,267.45 per cent last year!

It registered Sh11.379 billion in net profit last year, up from a relatively measly Sh212 million in 2017.

Additional reporting by Rosemary Mirondo & Gladys Mbwiga