Why new NBC boss faces uphill task

Dar es Salaam. The new managing director for NBC Limited, Mr Theobald Sabi, will have to scratch his head to bring the bank back to what it used to be before.

Mr Sabi, who was officially announced as the new managing director for the country’s third largest bank (in terms of assets size) on Monday, is coming to the helm of NBC’s management at a time when the sector was traversing through a bumpy road that stemmed from a squeezed liquidity, resulting in reduced lending to the private sector as commercial banks grapple with illiquid clients.

With a tight liquidity in the economy, borrowers failed to honour their obligations, resulting in an accumulation of high nonperforming loans and lower profits. For instance, the sector registered a total of Sh426 billion in net profits in 2014.

The amount rose to Sh438 billion in 2015 but it dropped to Sh423 billion and Sh286 billion in 2016 and 2017 respectively.

NBC writes off Sh12 billion in bad debts

Like other large banks, NBC has not been sparred in the wave of high NPLs and declining profit levels.

The bank registered a net loss of Sh5.56 billion during the third quarter of 2018 from a net profit of Sh8.9 billion during a similar quarter last year. An analytical look at NBC’s financial results for the quarter ending September 30, 2018 shows that the loss was largely a result of a decision to write off a total of Sh11.539 billion in bad debts during the third quarter of 2018 from only Sh3.365 billion that was written off during a similar period in 2017.

The writing off of the money, apparently as the banking sector abides by the International Financial Reporting Standards (IFRS) 9 (nine) which became effective in January this year (2018), partly helped to reduce the NBC’s NPL to total gross loans ratio from 11.4 per cent during the second quarter to 10.1 per cent during the third quarter. NBC performed particularly bad in two of its revenue streams, with the net interest income dropping to Sh13.8 billion from Sh15.58 billion during a similar quarter in 2017.

Earnings from fees and commissions also declined to Sh8.9 billion during the third quarter of 2018 from Sh11.249 billion during a similar quarter in 2017.

Who is Sabi?

Mr Sabi has been at NBC Limited for four years now.

He joined NBC in 2014 to assume the role of head of corporate and investment banking. Prior to joining NBC Limited, he worked for Standard Chartered Bank Tanzania Limited where he was the head of corporate banking.

He is replacing Mr Edward Marks whose two-year contract ended in June 2017.

Optimism

Since the expiry of Mr Marks’ contract, Mr Sabi has been working as acting managing director until his recent confirmation into the post.

The board said in a press statement on Monday that during the days that he has worked as head of corporate and investment banking, Mr Sabi has been able to transform the department’s team towards provision of world class solutions in trade financing and cash management. “He has also accomplished a number of market leading banking transactions and rolling out a number of technological advancements for corporate clients,” reads the statement that was signed by board chairman, Mr Francis Mwakapalila.

With an interest in growing local entrepreneurs; nurturing and fostering talent growth as well as adopting technology towards provision of banking services, Mr Mwakapalila, is positive that he (Mr Sabi) has what it takes to steer NBC towards the right direction.

A graduate in electrical engineering from the University of Dar es Salaam and a Certified Chartered Account (ACCA) as well as a Fellow of the Association of Chartered Accountants (FCCA), the board believes that Mr Sabi brings to NBC’s management a mix of audit, finance, credit management and sales.

Why NBC?

The story of NBC Limited is closely linked to Tanzania’s financial history. Ten years ago, it was almost a bizarre of talk NBC as a bank that would register less than Sh40 billion in annual profits. But the story started to change in 2008 when a number of key banks in Tanzania’s economy were hit by bad loans that were precipitated by the global economic recession.

In 2010, NBC Limited announced a profit before tax of only Sh5.442 billion - down from Sh58.042 billion that was registered during the preceding year.

Due to the global financial crisis, NBC Limited set aside a significant amount to cushion for probably bad loans totaling Sh50.1 billion for 2010 financial year compared to Sh14.7 billion for the previous year.

The then managing director, Lawrence Mafuru, however exuded confidence that things would improve, attributing the hopes to prudent lending, cutting down bad loans and efforts to collect outstanding monies amid economic recovery after easing out of global financial crisis.

Indeed, there were some improvements in NBC’s balance sheet during the past few years, with its net profit reaching Sh15.4 billion in 2017 from Sh13.8 billion in 2016.

Mr Sabi joins Mr Marks, Ms Mizinga Melu and Mr Mafuru on the list of people who have worked as managing director for NBC during the past ten years as well as Mr Pius Tibazarwa who acted the position in 2014.