Tanzania's large banks shared Sh715 billion net profit

Dar es Salaam. The year 2021 was good for commercial banks in Tanzania, with the country’s largest 10 lenders reporting a record combined net profit of Sh715 billion.

This suggests that the financial sub-sector - which went through a trying period during the past few years - was now up and running, giving lucrative returns to their shareholders.

The 2021 net profits is 62 percent more than the combined net profit of Sh440.9 billion that the 10 lenders registered in 2020.

It is also 63 percent more than the record net profit that was registered by the entire banking industry in 2015 which stood at Sh438 billion.

The 10 lenders are those with assets valued at above Sh1 trillion each. These are: CRDB Bank Plc, NMB Bank Plc, National Bank of Commerce (NBC), Standard Chartered Bank Tanzania and Diamond Trust Bank (DTB) Tanzania.

The others are: Stanbic Bank Tanzania, Exim Bank Tanzania, Azania Bank, Tanzania Commercial Bank (TCB) and Citibank.

A breakdown of how the ten lenders shared the Sh715 billion net profit shows that NMB Bank got Sh289 billion while CRDB Bank Plc bagged Sh267.56 billion.

In the third slot was NBC which did made a leapfrogged from a 2020 loss of Sh22 billion to record a staggering Sh40 billion in net profit.

Standard Chartered Bank Tanzania came fourth, with a net profit of Sh36.859 billion while Exim Bank and Stanbic Bank came fifth and sixth respectively. Exim Bank bagged Sh27.131 billion and Sh17.066 billion respectively.

DTB Tanzania came seventh, registering a net profit of Sh15.464 billion while TCB, Citibank and Azania came eighth, ninth and tenth respectively, taking home Sh11.238 billion, Sh6.346 billion and Sh4.796 billion respectively.

An analysis of the financial statements, published by commercial banks during the past few days show that the lion’s share of the money came from the interest income. The ten banks a total of Sh1.992 trillion in interest income in 2021. This was Sh209.677 billion or 11.8 percent more than what the Sh1.783 trillion that they jointly earned from that particular income generating stream in 2020.

Conversely, the ten banks upped their earnings from the non-funded income-generating stream to Sh963.812 billion in 2021. This was Sh74.8 billion or 8.4 percent more than the Sh888.964 billion that they jointly earned in 2020.

However, there has been a substantial rise in earnings from fees and commissions in what could likely explain that bancassurance was increasingly becoming an important income-generating stream for commercial banks.

Analysts say the massive improvement could also explain the fact that the economy was recovering from the negative effects of the Covid-19 pandemic.

“This is the result of economic recovery efforts from the Covid-19 pandemic,” said seasoned banker and financial analyst, Mr Kelvin Mkwawa.

NBC managing director, Theobald Sabi partly shares this view.

“Our 2020 results were affected by one off adjustments related, among others, to the Covid-19 pandemic impairment provisions,” he said. (Please read related story on page 8).

The bank, he said was now aggressively expanding its customer base across the country, in areas of provision of loans, investing on transactional systems for the convenience of customers and working with partners through agency banking to reach out to customers conveniently.

According to Mr Mkwawa, the rollout of vaccinations in 2021 as well as several policy measures by the government through the Bank of Tanzania (BoT) also breathed new life into banks and businesses in 2021.

“Banks have also designed and came up with a number of new products and/or services, including bancassurance which garnered significant earnings to major lenders,” he said.

Mr Mkwawa said implementation and initiation of major government’s strategic projects also injected some benefit into the industry, saying though majorities were being financed by foreign entities, they [the financiers] have entered into partnerships with local banks to issue guarantees which translate into money for Tanzania’s lenders.

Bankers air out different reasons for their entities’ performance.

NMB Bank Plc chief executive officer Ruth Zaipuna attributes the performance to what she termed “disciplined execution of its strategy, strong client activity, high-staff morale, and leadership agility”.

In 2021, she said, NMB Bank Plc launched a number of products and financial solutions, including ‘Youth Proposition,’ ‘Group Funeral Cover,’ ‘Ushirika Afya,’ ‘Jahazi Insurance’ and ‘Spend 2 Save,’ These widened access to affordable banking products and services thus raising the number of Tanzanians who have access to formal financial services. These helped to raise the bank’s customer base to over 4 million.

“Looking to the future, we are very optimistic about the journey…the bank will continue to focus on unlocking its potential and utilizing its strong fundamentals to create more value and shared prosperity for our stakeholders,” she emphasized.

For CRDB Bank Plc’s managing director, Mr Abdulmajid Nsekela, the rise in profits was a mix of growth in lending to the productive sector, yields from its investment in technology and lucrative returns from subsidiaries, notably, the Burundi subsidiary.

This “was supported by growth in lending to the private sector focusing on SME, agribusiness, structured finance and to micro enterprises….We also improved our operations focusing on more value adding activities….Our investment in technology and forefront innovative solutions allowed us to deliver strong customer experiences and value proposition during challenging times of the Covid-19 pandemic,” he said.

With a growth of 3.4 percent of CRDB Bank’s agents on quarterly basis, the lender closed the year with a total of 19,165 agents. As a result, said Mr Nsekela, over 87 percent of total bank transactions were performed through digital channels.

The Standard Chartered Bank chief executive officer, Mr Sanjay Rughani extolled the bank’s investment in digital platforms that made the lender’s services more accessible to clients.

Standard Chartered Bank’s deposits grew by 49 percent to hit Sh1.6 trillion due to a number of factors and mainly due to increased accessibility of the bank’s products and services through the new digital platforms.

“Over 90 percent of our clients have now moved to manage their banking through our digital platforms which means they are benefiting from speed, efficiency and better value in their banking experience,” said Mr Rughani

He said the measure taken in collaboration with BoT have also had a positive impact on the banking sector’s performance.