Dar es Salaam — Most of Tanzania's top banks defied the Covid-19 pandemic to report higher net profits in the second quarter that was truly hit by the pandemic which disrupted economic activities across the world.
An analysis of banks with at least Sh1 trillion in total assets each indicated that seven of the 11 largest banks increased their profitability in the April-to-June period this year - with two others nearly halveing their net earnings.
Yet two other banks made losses during the three months compared to the similar period last year, according to the banks' financial statements published last week.
The top banks - which together account for the largest share in industry assets - included CRDB Bank, NMB Bank, National Bank of Commerce (NBC), Stanbic Bank, Standard Chartered, Absa, Diamond Trust Bank, Exim Bank, Azania Bank, Citi Bank, and the latest member in the industry, TPB Bank, formed by mergingTanzania Postal Bank with TIB Corporate Bank.
NMB Plc increased its quarterly net profits by 22.7 percent to Sh44.8 billion at the end of June 2020 compared with Sh36.5 billion recorded during similar period in 2019. CRDB Bank also improved its profitability by five percent, to Sh35.1 billion from Sh33.5 billion.
Exim Bank increased its net profits by about 70 percent to Sh4.1 billion compared with Sh2.4 billion previously while Stanbic Bank net profits increased more than threefold to Sh20.4 billion, up from Sh4.6 billion in the same period previously.
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Diamond Trust Bank increased its profits after tax by 27 percent to Sh4.2 billion. Azania Bank increased its profits by 12 percent to Sh3.5 billion while TPB Bank also increased its profits by 5.7 percent to Sh3.7 billion.
Two of the top banks that recorded losses were Absa (with a loss of Sh3.4 billion, compared with Sh3.7 billion profit previously) and City Bank, which had Sh247 million loss compared with Sh1.5 billion profit previously.
The banks which reduced their profitability are Standard Chartered and the National Bank of Commerce (NBC). Standard Chartered's profit dropped from Sh12.06 billion to Sh6.25 billion while that of NBC dropped from Sh7.1 billion to Sh3.39 billion.
Bankers speak out
The banks attribute the profitability with increased loans - and, hence, more interest payment despite the disruption of some economic activities by Covid-19.
"The bank's performance is a reflection and outcome of our growth strategy, maximizing on our strengths, capitalizing on market opportunities and the inherent potential to drive value creation for the shareholders and the Tanzanian community," said NMB acting chief executive officer Ruth Zaipuna.
She said the bank's performance largely owes to a favorable business operating landscape following prudential macro-economic reforms, coupled with the government's decision not to lockdown the country during the Covid-19 pandemic.
"Looking ahead, the bank is expecting to continue on the growth trajectory as it takes up a greater role in driving Tanzania's growth agenda through credit extension in the personal/household sector, agriculture, insurance, manufacturing and construction," she added.
CRDB chief executive officer Abdulmajid Nsekela attributed the performance with bank strategies during Covid-19 and measures taken by the central bank to offset the impact of the pandemic.
"We made a commitment to support our customers during the crisis period to enable them to stabilize and, in the process, launched new ventures designed to uplift the micro and small businesses across the country," said Mr Nsekela.
"We have seen SMEs perform better even during the crisis and we want to continue focusing this sector as well as agriculture, which have a great potential to transform our economy," he added.
Exim Bank chief finance officer Shani Kinswaga said the bank capitalized on performing sectors while containing operating costs.
"The bank has supported the impacted sectors during the pandemic by restructuring their facilities in order match their current cash flows. As of June 2020, the bank has provided relief of over Sh160 billion in the form of payment holidays and extension of loan repayment periods to help our clients in various sectors sail through the impact of Covid-19 in their businesses," he said.
"The bank has revised its medium-term plan following Covid-19 disruption with the objective of sustaining the growth momentum," he added.
The Bank of Tanzania's Monetary Policy Committee said last week that the financial sector was "stable and liquid enough to sustain economic activities" after recent measures taken to offset the impact of Covid-19.
Economists also believe the future of the sector remains bright and more economic activities hit by Covid-19, such as tourism, were now recovering.
"The future of banking is generally fine because more economic activities are reopening and improving. The budget has policies to stimulate growth, and the central bank adopted an accommodative monetary policy. I think all these point to a good future," said Prof Delphin Rwegasira of the University of Dar es Salaam's Economics Department.
Sectors such as tourism and entertainment were affected by Covid-19. Yet, the economy grew by 5.7 percent in the first quarter.
The government projects that the economy will grow by 5.5 percent in 2020. This is less than the earlier projection of 6.9 percent due to the impact of the coronavirus.