CRDB Bank's net profit has dropped 19 per cent, the bank announced in Dar es Salaam on Thursday, citing huge fund set aside for bad debts following instability of the agricultural sector.
Net profit dropped to 38bn/- in 2011 from 47bn/- in the previous year, with foreign exchange trading fluctuating miserably due to the challenges facing the local currency. The Bank's Managing Director, Dr Charles Kimei, said the bank has to cancel bad debts worth 50bn/- mostly from cotton sector that was hard hit since 2008.
"Efforts to recover the debts were wiped out by falling average output by 50 per cent in the last three years," Dr Kimei told reporters at the bank headquarters. He added "to make thing worse even the price dropped drastically to USD 0.70 per pound from USD 2.00 in the last season to dash hopes for lenders to service their loans."
On average the cotton production is about 300,000 tonnes per year but since 2008 the output dropped by almost 50 per cent to about 150,000 tonnes in averages. Over 50 per cent of CRDB loans portfolio goes to agricultural sector, with 690bn/- directed to the sector last year. The bank vowed to continue lending to the sector despite the setbacks.
Dr Kimei said the debt cancellation does not mean the bank has lost the money but did so to clear the balance sheet. The money will be recovered and the bank was in a good health. "We cleared the balance sheet to pave way to return into a good profitability in the next year (2012)," Dr Kimei said, "now the books are clean, we expect to make a good profit of 100bn/-."
The CRDB's assets grew to 2.7trn/- to become the biggest bank in the country in terms of assets, beating 48 other banks. While deposits increased by 18 per cent to 2.4trn/-, which was an increase of 400bn/- in 12 months. The deposits assisted the bank to increase lending capability from 1.1trn/- to 1.4trn/-.
In last year the bank network expanded rapidly to reach 75 branches after opening up five new branches in Mwanjelwa in Mbeya, Ubungo, DSM, Bagamoyo in Coast, Mpanda in Rukwa and Bariadi in Shinyanga. "The bank spent almost 5bn/- in opening the braches as one branch costs not less than 800m/-," the MD said, noting that the bank created 330 new jobs last year through expansion.
Other branches which are still under construction are Oysterbay, Tegeta, Quality House and Tabata in DSM, CCT House Dodoma, Masasi Mtwara, Mwaloni Mwanza, Kasumulu and Tunduma Mbeya.
Automated Tellers Machines (ATMs) also increased to 209 from 162 including 20 ATMS that also facilitate money deposit. Savings and credit cooperative society as well as microfinance institutions under CRBD bank support reached 490 from 472. In comparison CRDB topped other banks in deposits, loan portfolio, and assets last year.
It was the second biggest bank only on terms of profitability after National Microfinance Bank (NMB) that posted pre-tax profit of 103bn/-. After CRDB in pre-tax profit ranking was Standard Chartered Bank that generated 48bn/-, while Exim Bank came fourth with 21bn/- followed by NBC that posted a pre-tax profit of 18bn/-.