Barclays Bank Tanzania (BBT) Managing Director Kihara Maina who told a local daily that their loan impairments were up by Sh7.8 billion.
What you need to know:
At the end of June, the loans it had advanced to customers that had not been serviced for 90 days amounted to some Sh33.3 billion. These non-performing loans were about Sh33.6 billion at the end of the first quarter of this year.
Dar es Salaam. Barclays Bank Tanzania (BBT) has reduced its issuance of new loans.It has also restricted other lending activities as it struggles to deal with a huge burden of bad debts that have affected its operations in recent years, The Citizen on Sunday has reliably learnt.
At the end of June, the loans it had advanced to customers that had not been serviced for 90 days amounted to some Sh33.3 billion. These non-performing loans were about Sh33.6 billion at the end of the first quarter of this year.
Insiders at the bank said more stringent lending requirements had been put in place following the rising of default levels, which have cost the lender dearly.
Analysts said the bank had for quite some time not been lending to new customers or writing new loans.
The management did not deny or confirm this but the sources at the bank said the issuing of new loans was in fact tightened in June. That was 13 months after it closed 10 branches and retrenched 100 workers in a move the bank termed as “restructuring” but analysts said was necessitated by operational and financial difficulties.
“Earlier in the (second) quarter, the bank took a strategic approach to concentrate on a certain consumer segment with regards to lending,” the bank’s head of marketing and communications, Ms Neema-rose Singo, said.
“If you look at our recent financials, our numbers clearly evidence that our loans and advances have been on the increase quarterly,” she added.
Its latest publicly available financial statements show that lending rose by Sh1.76 billion between the first and second quarters of this year from Sh358.93 billion to Sh360.69 billion.
Figures from the 2013 Tanzania Banking Survey (taken from publicly available information) show that Barclays’ NPL ratio reached a massive 24 per cent of gross loans and advances in 2010 but had fallen to 10 per cent by 2012. In contrast, the average NPL ratio for the banking sector as a whole has been about 10 per cent for the past few years.
In February this year, BBT managing director Kihara Maina told a local daily that their loan impairments were up by Sh7.8 billion. The statement meant that the amount was used to write off bad loans, which customers had either defaulted on or were unlikely to be recovered from them.
Figures in the latest financials put impairment losses on loans and advances at Sh2.14 billion at the end of June compared to Sh2.34 billion three months earlier. The cumulative amounts used to write off bad loans mid this year and in 2012 were Sh4.69 billion and Sh3.07 billion respectively.
A bank employee at one of its outlets in Dar es Salam said personal loans were currently available to only 12 organisations, which meet the bank’s new lending criteria. The source did not reveal the names of organisations.
“We have resumed lending but to a few organisations…by the end of this month we expect the number of eligible companies for personal loans will increase…call me then to find out,” the employee told this reporter over the phone last week.
The bank is unlikely to make any public announcement regarding its tightened lending as this is unlikely to sit well with customers who want to top up their existing loans or borrow afresh.
BoT Banking Supervision head Agapiti Kobello said no law or regulation requires banks to make such a pronouncement but noted that lending was crucial for the survival of any bank. Financial experts, who said they were not surprised by Barclays’ restricted lending, said the lender could not alert the market because doing so would be detrimental to its operations.
“There is no way any bank would do that. They (Barclays) don’t want to ruin their reputation in the market. They are also scared to put off potential customers and they don’t want to appear financially weak,” noted one of them who asked for anonymity because he has close relations with one of the big banks in the industry.
According to financial analyst Mehboob Champsi of Sifa Capital Limited, a bank stops lending or suspends writing new loans when it has difficulties in raising deposits.
Treasury expert John Mashaka said on most occasions the suspension of lending was caused by borrowers defaulting on their loan obligations, liquidity issues and a weak balance sheet.“A bank’s ability to raise funding either through deposits or interbank borrowings, can affect its ability to issue new loans.
However, this doesn’t seem to be the problem for Barclays Tanzania. The bank seems to have sufficient deposits to fund its loans. The problem for Barclays lies in its bad loans,” noted a banking sector specialist, who also asked for anonymity.
“They (Barclays) are probably now only lending to established customers they have long relationships with and they are only rolling over existing loan facilities rather than increasing loan amounts.
Barclays did much the same at home in the UK for a few years between 2008 and 2010 during the height of the financial crisis because they had been hit by a very large amount of bad debts,” he added.
