Banks chart ways to boost profits hit by pandemic

Dar es Salaam. Commercial banks have revealed plans to increase profits, which took a hit during the Covid-19 pandemic last year.

An analysis of the financial statements of the ten largest banks for the fourth quarter of 2020 shows that six reported decreased profits, while one posted a loss. Only three tier-one banks increased their profits.

They include NMB Bank and CRDB Bank, Tanzania’s biggest lenders, which defied the pandemic to post record profits.

NMB Bank’s net profit for the year was Sh205.5 billion, up from Sh142.335 billion in 2019.

On the other hand, CRDB Bank broke its 2015 record when its net profit jumped to Sh152.8 billion last year from Sh122.65 billion in 2019.

Exim Bank made a net profit of Sh11.19 billion in 2020 compared to a loss of Sh17.77 billion the previous year.

“We will continue to improve customer service by focusing on digital platforms. We have also sat down with them to hear what they had to say so that we can respond accordingly,” Exim Bank chief finance officer Shani Kinswaga said.

He said the bank had also reduced some of its operating costs without affecting operations.

“There will still be challenges posed by Covid-19 this year, but there are a lot of opportunities as well. What we need to do is remain close to our customers,” Mr Kinswaga added.

The National Bank of Commerce (NBC) recorded a cumulative loss of Sh15.7 billion in 2020 from a profit of Sh22.65 billion in 2019.

NBC managing director Theobald Sabi attributed the loss to two main factors, including the global impact of Covid-19, which hit Tanzania’s tourism industry hard.

The second factor was “a one-off restructuring cost” to align the bank to its strategic plans.

“Having taken measures in 2020 towards our strategic ambitions, NBC looks at 2021 as a year of profit growth, a leaner operating cost base and growth of the customer base,” Mr Sabi.

“In the last three years, NBC has invested in electronic payment systems, as well as alternative channels to support growth in the SME, agriculture and mining sectors,” he added.

Despite returning a loss, NBC reduced its non-performing loan ratio to 3.8 percent to be within the Bank of Tanzania benchmark rate of five percent.

Loans and advances issued by NBC to the private sector grew by 21 percent compared to the previous year.

“As the government drives the inclusion of the unbanked population in the financial system, NBC is aligning to that direction in partnership with various stakeholders. NBC continues to work closely with government agencies and development partners like TanTrade, Sido, TRA, TBS and Tabwa in organising business clinics to equip small business holders with the necessary financial literacy skills to ensure sustainable business growth,” Mr Sabi added.

He said rising entrepreneurship in the country, conducive government policy and ongoing mega projects such as the Mwalimu Nyerere Hydroelectricity Dam, Hoima-Tanga oil pipeline and standard gauge railway (SGR) “all point to better days for the banking industry in Tanzania”.

Diamond Trust Bank (DTB) Tanzania also saw its cumulative profit fall from Sh16.86 billion in 2019 to Sh7.01 billion in 2020 due to the Covid-19 pandemic.

“Covid-19 disrupted many businesses, and adversely impacted the trade, hospitality, tourism, aviation and education sectors of the economy, which happen to be key drivers in DTB’s SME and corporate portfolio. As a result, transaction volumes went down, and provisions for bad debts went up, causing lower profits and lower investments in the economy,” DTB chief executive Ravneet Chowdhury said.

“Besides managing our investment costs in infrastructure development and NPLs, we intend to align our pricing on market rates, while also taking advantage of recent BoT policy measures on flexibility in restructuring of loans from borrowers facing financial difficulty due to the pandemic,” he added.

“Additionally, we have put in place a seamless banking system incorporating mobile, internet and agent banking that is able to serve our customers without having to visit the brick-and-mortar branches. We have embarked on the re-engineering of our processes and procedures in view of improving customer experience, while also offering value for money,” Mr Chowdhury said.

Economists say there is a need to have in place a flexible fiscal policy to support businesses, including the banks.

Dr Abel Kinyondo of the University of Dar es Salaam said falling profits were a continuation of the banking industry crisis, which has seen some lenders go into administration.

“For a long time, monetary policy measures have been adjusted to address challenges the banking industry has been grappling with, but I think we also need solid fiscal policies,” he said.

“The way the government spends by giving business to its institutions and, of course, a largely unfriendly tax regime are starving the private sector of money. As a result, non-repayment of loans is getting worse and affecting banks,” he added.