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What NMB’s takeover of China bank means

Friday March 05 2021
NMB PIC

Bank of Tanzania governor Florens Luoga and NMB Bank chief executive Ruth Zaipuna display documents in Dar es Salaam yesterday after NMB Bank acquired China Commercial Bank Limited. PHOTO | COURTESY

By Rosemary Mirondo

Dar es Salaam. NMB Bank Plc yesterday officially acquired China Commercial Bank Limited, three months after the latter was placed under the industry regulator’s statutory management.

The Bank of Tanzania (BoT) placed China Commercial Bank Limited under its management on November 19, 2020 to protect depositors’ money following the lender’s poor performance.

Yesterday, BoT governor Florens Luoga said the regulator was transferring all assets and liabilities of China Commercial Bank Limited to NMB Bank Plc in a decision that cements the latter’s (NMB Bank Plc) status as Tanzania’s largest bank in terms of assets.

Prof Luoga said the transfer of assets and liabilities was in line with Section 58 (4) of the Banking and Financial Institutions Act, 2006, and was the resolution option after putting China Commercial Bank Limited under the BoT’s statutory management.

“Depositors and creditors of the bank will be advised in due course how and when they will start to access banking services through NMB Bank Plc,” he said, noting that borrowers were required to continue repaying their loans as per their previous agreements with their former bank.

The decision, he said, was arrived at after deliberations between the BoT on the one side and owners of China Commercial Bank Limited as well as the NMB Bank Plc on the other.

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The BoT, NMB and other stakeholders were putting in place legal procedures for the transfer of assets and liabilities to NMB Bank.

NMB Bank Plc managing director Ruth Zaipuna said customers and stakeholders of China Commercial Bank should remain calm because their money was in safe hands. Customers of China Commercial Bank will start getting service within 60 days, depending on the speed of conducting the know-your-customer process.

“We have put our branches including Ohio for the process including dialogue with borrowers of the bank,” she said.

NMB Bank Plc could specifically be looking to tap into the benefits that come with the presence of Chinese traders and investors across Tanzania.

“We are the largest bank in Tanzania in terms of assets, profitability and branch network. We have the ability to carry this responsibility and serve these clients and the Chinese community in Tanzania in an efficient and professional manner,” said Ms Zaipuna.

The acquisition of China Commercial Bank adds several billion shillings more to NMB Bank Plc’s Sh7.1 trillion portfolio.

On November 19, 2020, the BoT put China Commercial Bank under its statutory management following failure of the commercial bank to meet regulatory requirements regarding capital adequacy.

“Thus, to permit China Commercial Bank Limited to continue with banking operations while under the state of undercapitalization is detrimental to the interests of depositors and poses systemic risk to the stability of the financial system,” the BoT said last November .

As of September 30, 2020, China Commercial Bank had issued loans, advances and overdrafts totalling Sh2.286 billion against only Sh1.2 billion it was holding in customers deposits.

This signalled that the bank’s loans averaged 190 percent of total deposits, far beyond acceptable levels. As of September 30, 2020, China Commercial Bank held Sh6.4 billion in assets.

The bank, which had operated for about seven years, had Sh20.881 billion in paid up share capital but its total shareholder funds had been on the decline during the past few years to partly account for losses.

As of September 30, 2020, its total shareholder funds dwindled to Sh4.6 billion, being a drop of about Sh1.478 billion from the Sh6.078 billion that was quoted as of December 31, 2019.

The bank’s assets stood at Sh8.556 billion in December 2019.

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