Tanzania: Insights Into Tanzania's Banking Sector Performance in Q1 2024

THE Tanzanian banking sector displayed varied performance across different financial institutions during the first quarter of 2024.

CRDB Bank Plc has declared a dividend of 50/- per share, while NMB Bank Plc's board has proposed a dividend of 361/18 per share. Combined, these two leading banks will return approximately 311bn/- to shareholders this year, providing significant funds for reinvestment.

With a combined total of 26.43tri/- in assets, CRDB and NMB are pivotal to the sector's dynamics. Given their substantial contribution to the sector's growth over the past three years, examining the financial sector through the lens of their performance in the first quarter of 2024 is crucial.

These banks continue to drive growth and stability within Tanzania's financial landscape. CRDB Bank Plc, with total assets of 13.966tri/-, and NMB, with 12.455tri/-, also lead in loan advances, holding 8.858tri/- and 7.857tri/-, respectively.

This dominance in the market, with substantial loan portfolios, significantly contributes to their asset base. CRDB leads with 344.008bn/- in interest income, followed by NMB with 329.296bn/-.

Exim Bank and NBC which are also top tier banks showed competitive interest incomes of 58.598bn/- and 86.929bn/-, respectively.

In terms of non-interest income, Stanbic Bank reported a notable figure of 37.679bn/-, while Standard Chartered Bank performed well with 23.744bn/-. CRDB and NMB showed strong net incomes after tax, with CRDB at 127.505bn/- and NMB at 160.361bn/-, marking substantial growth from the previous year.

Notably, Exim Bank and NBC also had significant improvements in their net incomes, reflecting effective cost management and revenue generation.

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CRDB and NMB posted healthy return on assets (ROAs) of 5.5 per cent and 5.0 per cent, respectively, while Citi Bank excelled with the highest ROA of 8.9 per cent, indicating efficient asset utilization. CRDB and NMB maintained robust return on equity (ROEs) of 27.5 per cent and 29.0 per cent, respectively.

Exim recorded the highest ROE at 38.0 per cent, showcasing high profitability relative to shareholders' equity. A lower cost-to-income ratio (CIR) indicates better efficiency.

The industry average for CIR hovered around 50 per cent to 60 per cent. CRDB had a CIR of 46, demonstrating high operational efficiency. Exim showed significant improvement with a CIR of 49. Non-performing loans (NPL) ratios are critical indicators of asset quality. In the first quarter of 2024, CRDB and NMB had NPL ratios of 3.23 per cent and 2.80 per cent, respectively, reflecting good credit risk management.

Smaller banks like TIB Development Bank and I&M Bank had higher NPL ratios, indicating potential challenges in credit quality. Staff productivity and cost management are crucial for operational efficiency.

CRDB had a high portfolio/staff ratio of 2.216bn/-, highlighting effective utilisation of human resources. Citi led with the highest cost per staff at 5.514bn/-, possibly indicating higher investment in talent to drive performance. Comparing year-on-year performance, CRDB and NMB showed considerable growth in net income after tax, marking increases of 41.3 per cent and 30.6 per cent, respectively.

On the other hand, some banks, such as Equity Bank and Mkombozi Commercial Bank, showed negative growth, indicating areas for potential improvement.

While the top-tier banks demonstrated strong performance, smaller banks faced challenges, particularly in managing nonperforming loans (NPLs) and improving cost efficiency.

However, the overall sector showed resilience, with opportunities for growth in non-interest income and improved operational efficiencies. The sector grew by 12.08 per cent in the first quarter of 2024, from 4,536.46 points in January to 4,084.61 points as of March.

The two leading banks, CRDB and NMB, have also shown resilience in the stock market, with their stock prices increasing by 23.91 per cent and 6.22 per cent, respectively, in the first quarter of 2024.

This underscores the dynamic nature of Tanzania's financial sector, highlighted by the robust performance of the leading banks. It reflects a sector poised for growth, with significant contributions from key players driving overall financial stability and development in the market.

Most recent data shows NMB's shares observed a 5.49 per cent increase, while CRDB's stock price experienced a significant drop of 12.50 per cent as of May 17, 2024, compared to the preceding week.

This indicates a dynamic market environment that presents opportunities for strategic investors and stakeholders to capitalize on market fluctuations and make informed decisions for potential gains.

The resilience observed in the first quarter of 2024 suggests a promising outlook for the Tanzanian banking industry.

This promising future is particularly underscored by the ambitious plans presented at CRDB's Annual General Meeting (AGM), which took place in Arusha on May 18, 2024. NMB's AGM, expected to take place on Friday, June 7, 2024, will be closely watched by investors, keen to analyse the plans presented and align them with their investing strategies.

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