Why banks’ shareholders must be happy
Dar es Salaam. Commercial bank shareholders will be wearing broad smiles as an improving business environment sent lenders’ profits up in 2019, latest data show.
Eleven of the 12 “most profitable commercial banks” in Tanzania reported increased profits in 2019, according to the recently-released financial statements.
The 11 banks increased their combined total earnings by a relatively staggering Sh166.709 billion in 2019, translating into an average net profit increase of 63.441 percent. NMB Bank Plc, CRDB Bank Plc, Standard Chartered Bank, NBC Bank, Stanbic Bank, Diamond Trust Bank (DTB), TPB Bank, KCB Bank Tanzania, Azania Bank, Exim Bank and Barclays (Absa) reported a total of Sh429.487 billion as their combined net profit for the year to December 31, 2019.
In the year that ended on December 31, 2018, the eleven lenders’ combined net profit stood at ‘only’ Sh262.778 billion.
Generally, improved profits translate into more dividends for shareholders.
After a slowdown in profit growth in the third-quarter of 2019, NMB Bank Plc came back with a new vigour in the fourth-quarter to maintain its position as the most profitable lender in the Tanzanian market. Its net profit rose by a cool 52 percent – to reach Sh148.6 billion during the year that ended on December 31, 2019 up from Sh97.663 billion in the same period in 2018. Its NPLs dropped to 6.9 percent from 8.3 percent as of September 30, 2019 while assets rose to Sh6.55 trillion.
NMB’s acting managing director, Ms Ruth Zaipuna, attributes the bank’s profits growth to a five percent increase in operating income, a 27 percent reduction in impairment charges and cost control measures that resulted in yielding a flat year-on-year operating expenses.
With a net profit growth rate of 75.9 percent at bank level – and 87 percent at group level – CRDB Bank shareholders can expect nothing but news of improved dividends from the bank’s chief executive officer, Abdulmajid Nsekela, during the next annual general meeting in about four months from now. At the bank level, net profit leapfrogged to Sh122.444 billion in 2019, from Sh69.588 billion in 2018. Earnings from its interest income-generation stream rose by 18.5 percent to Sh511.458 billion in 2019 while earnings from the non-interest stream went up by 18.7 percent to close the year 2019 at Sh248.271 billion. Mr Nsekela – who doubles as chairman of the Tanzania Bankers Association (TBA) – attributes the net profit rise to an improvement in the business environment, as well as digitisation of its services.
“The business environment has significantly improved and, as a bank, we made a lot of changes in our operating model – but, more importantly: acceleration of our digital offerings,” he told The Citizen yesterday.
CRDB’s total assets rose to Sh6.423 trillion, from Sh6.067 trillion as of September 30, 2019, while NPLs were contained at 5.5 percent of total gross loans as of December 31, 2019.
His KCB Tanzania counterpart, Mr Cosmas Kimario, shared similar sentiments.
“We have done well because the business environment is very good, and customers have been growing day by day….We have upgraded our digital financial services. We have also opened agencies in many places which have helped our customers to get our services faster and more conveniently”.
His bank’s net profit rose to Sh14.168 billion in 2019, from Sh9.56 billion in 2018.
NBC Bank and Azania Bank may sit in positions four and nine respectively in terms of the amount of net profit that they generated. But, in terms of actual profit growth rate, their shareholders could be the happiest in town.
The former’s net profit jumped by 119.444 percent, to reach Sh26.651 billion in 2019, while that of the latter skyrocketed to the double-digit level of Sh12.7 billion in 2019, up from Sh5.9 billion.
For Standard Chartered Bank, it was a sound performance in the recovery of impaired loans and advances that paid off, aiding the lender to maintain its cordial relationships with clients while simultaneously raising its net profit to Sh34 billion in 2019, up from the Sh20 billion in 2018.
But probably, it is Exim Bank shareholders who will have the last laugh because – moving from a 2018 loss of Sh13.9 billion to generating a net profit of Sh9.8 billion in 2019 makes theirs one of the best performing lenders.
Stanbic Bank’s net profit rose by 31 percent to Sh21.255 billion in 2019 while that of DTB rose by 12.8 percent to reach Sh17.373 billion.
TPB Bank’s net profit rose by 39.6 percent to reach Sh16.9 billion while Barclays (Absa) closed the 11th position with a 59.2 percent rise in net profit. It registered a net profit of Sh9.6 billion in 2019.
Additional reporting by Gadiosa Lamtey
