Tanzania's top banks’ profit rise in first quarter despite Covid-19

Tuesday May 19 2020


By Alawi Masare

Dar es Salaam. Tanzania’s big banks increased profitability in the first three months of 2020 despite Covid-19 slashing their foreign exchange earnings.
The total profit for the ten largest banks increased to Sh109.2 billion at the end of March this year compared with Sh87.66 billion the lenders registered in the same period of 2019, according to their quarterly financial statements.
The ten banks with at least Sh1 trillion in assets which were analysed included CRDB Bank, NMB Bank, National Bank of Commerce (NBC), Stanbic Bank, Standard Chartered, Absa, Diamond Trust Bank, Exim Bank, Azania Bank and Citi Bank.
Although the total profitabil-ity improved, individual banks per-formed differently, with most of the increase contributed by the two largest banks NMB and CRDB.NMB Bank more than doubled its quarterly profit after tax from Sh20.2 billion to Sh48.7 billion during the same period.
 The bank attributed the 141 percent increase to improved credit to the private sector that extended from fourth quarter of 2019 to the first quarter.
“The Bank has also continued to monitor its operating costs appropriately reducing its cost to income ratio to 53 percent by end of Q1, 2020 and sustained efforts and focus on ensuring a quality loan book,” said NMB acting managing director Ruth Zaipuna.
However, she raised concern over what she anticipates as increased impairment pressure on the loan book following the ongoing Covid-19 but said the management was taking measures to contain the anticipated challenge.

On the other hand, CRDB Bank improved its quarterly profit from Sh29.7 billion to Sh31.1 billion after net interest income improved.
The bank’s net interest income increased from Sh119.78 billion in the first three months of last year to Sh132.08 billion during the first quarter of 2020.Standard Chartered Bank Tanzania also increased its profit from Sh8.8 billion to Sh10.2 billion during the period under review.
Azania Bank had the highest rate of profit improvement from Sh460 million in the first quarter of 2019 to Sh5 billion in the first quarter of 2020.
 This was about 986 percent improve-ment in the profitability powered by commissions and fees which also increased from Sh1.5 billion to Sh5.1 billion. NBC, Stanbic, DTB, Absa, Citi Bank and Exim were all profitable but their levels of profits had shrunk during the period.
The banks’ reports indicate that foreign exchange earnings also reduced significantly as Covid-19 have disrupted travel and tourism activities across the globe.
The slowing of the foreign currency earning is seen as affecting the profitability of the banks this year.

“The forex earnings are likely to show even further drop in the second quarter reports and thus nega-tively impacting the profitability of banks.
 The negative impact will likely extend to third quarter as well if the pandemic persists. Actually the second quarter is likely to be worse than the first quarter if the banks won’t change their strategy,” said Christopher Makombe, an independent financial market consultant and forex trading coach.
He said the banks should now start thinking to shift the focus to inter-national forex markets in order to maintain their revenue stream in forex earnings.