THE ratio of Non-Performing Loans (NPLs) to Gross Loans increased to 8.01 per cent from 6.81per cent which is above the bank's industry benchmark of 5 per cent, thus indicating a decline in the sector's asset quality.
According to the Bank of Tanzania (BoT) Directorate of banking supervision annual report 2012, the increase was caused by unsatisfactory performance of the export sector and slow recovery of some borrowers from the effects of global financial crisis.
However, the ratio of NPLs net of provisions to total capital was 22.41 percent indicating that should all the NPLs turn into loss; the banking sector's capital will be eroded only to the maximum of 22.41 per cent.
The bank's total capital made an increase of 22.04 per cent during the year to 2.13tri/- compared to 1.74tri/- of the previous year. The sector's loan portfolio was well diversified in the economy in various subsectors of the economy as follows including personal loans 20.02 per cent, trade 20.80 per cent and manufacturing 11.19 per cent.
Others are agriculture, fishing, hunting and forestry 11.11 per cent, building, construction and real estate 8.95 per cent, transport and communication 6.90 per cent and other sectors 20.48 per cent.
During this period, the banking sector's ratio of rate sensitivity to market risk was moderate. The ratio of Rate Sensitive Assets to Rate Sensitive Liabilities and Net Open Position to Core Capital were 125.8 per cent and negative 1.65 per cent, as compared to 127.3 per cent and negative 2.39 per cent, recorded in preceding year, respectively.
The banking sector remained adequately capitalised with the ratio of Core Capital and Total Capital to Total Risk Weighted Assets and Off Balance Sheet Exposures were 16.7 per cent and 17.4 per cent which were slightly below 16.9 per cent and 17.6 per cent, respectively.
However, the ratios were above the required minimum legal capital adequacy ratios of 10 per cent and 12 per cent, respectively. During the year, the banking sector recorded a profit before tax of 406.9bn/- which was an increase of 18.63 per cent from 343bn/- of the previous period.
The banking sector's liquidity position declined slightly in 2012 as reflected by ratio of Liquid Assets to Demand Liabilities (Liquidity Ratio) which stood at 38.3 per cent compared to 40.1 per cent in the period before. The ratio was above the minimum regulatory limit of 20 per cent.
Furthermore, the ratio of Gross Loans to Total Deposits or lending Ratio increased to 68.7 per cent from 64.3 per cent in previous year. The ratio was within the maximum regulatory limit of 80 percent.