BANKS have continued to post outstanding performance despite being on a recovery path from Covid- 19 following their quarter two performance results.
In the last three years, the banking industry has suffered a setback due to some reforms initiated by the government which saw six lenders going under liquidation and the pandemic was seen to slow down the recovery path.
However, contrary to the fears, the sector posted outstanding performance in Q2 amid the virus and they now project a rosy-picture ahead.
Orbit Securities Head of Research and Analytics Imani Muhingo said banks were still on a recovery path since 2018 and Covid-19 was not enough to block the path. “… (Net) Interest income is growing along with loan books while impairment charges are slowing down…,” Mr Muhingo told ‘Daily News’ yesterday.
The quarterly growth in loan books may be partially explained by a possible slowdown in repayments during the Q2-20 resulting from a slowdown in businesses, the analyst said.
“I will be excited for the rest of the year if the banks pull off quarter two with such resilience and positive growth. I can’t wait to see the performance for the rest of the year,” he noted.
The most profitable banks in Q2, whose assets are over 1.0tri/- , and which are wholly or partially owned by the government are NMB and CRDB, while TPB enters the top ten list after merging with Women Bank, Twiga Bancorp and TIB Corporate, as Azania and TIB Development made remarkable performance.
But NBC profit slowed down while private banks such as Exim, Stanbic, and Diamond Trust made profits in Q2.
The banks which have largest market shares are CRDB, NMB, NBC, Stanbic, Standard Chartered, Absa, Diamond Trust, Exim, Azania, Citi Bank, and the latest member in the industry, TPB.
In Q2, NMB profits jumped 23 per cent to 44.8bn/- from 36.5bn/- of a similar period last year. CRDB by 5.0 per cent to 35.1bn/- from 33.5bn/-, TPB profit by 5.0 per cent to 3.7bn/- from 3.52bn/- three months to March.
Exim’s pre-tax profit rose 35 per cent to 6.58bn/- from 4.90bn/- while Stanbic net profits increased by over threefold to 20.4bn/- from 4.6bn/-.
The outstanding profit performances, which come mainly from net interest income, are attributed to good measures taken by the government, especially for not locking down the economy entirely during the outbreak of the coronavirus pandemic.
Mr Muhingo noted further that what was even more remarkable was the growth of interest income and a substantial decline in impairment charges for both banks, despite business challenges during the Covid-19 period.
Another economist-cumbanker, Dr Hildebrand Shayo, told this newspaper that Bank of Tanzania (BoT) circular issued recently could have effects on what is being reported.
“The banking industry remaining resilient despite Covid- 19 doesn’t help much to indicate the banking industry has improved,” Dr Shayo argued.
The economist-cum-banker urged further that the profit declared by banks, especially net interest income, is a result of restructuring and not as a result of more loan disbursement.
“To get a clear picture you need to look at profit reported to be earned against cash flow reported by these banks. One question we need to ask is to what extent has banks’ balance sheet expanded?” Dr Shayo remarked.
However, NMB financials showed that the loan book jumped almost 100bn/- to 1.8tri/- by June and elevated the lender to become the first bank to have assets worth more than 7.3tri/- mark on quarterly basis from 6.5tri/-.
The NMB Acting CEO, Ruth Zaipuna, said that the bank’s performance was a reflection and outcome of growth strategy and maximising on their strengths while capitalising on market opportunities.
“We remained focused even during the coronavirus pandemic,” Ms Zaipuna added.
Plus, the CRDB loan portfolio increased to 3.61tri/- from 3.48tri/- while assets grew by 6.5 per cent to 7.0tri/- from 6.57tri/-.
Exim’s Chief Financial Officer, Mr Shani Kinswaga, said the bank capitalised on performing sectors while containing operating costs.
“The bank has supported the impacted sectors during the pandemic by restructuring their facilities in order to match their current cash flows,” Mr Kinswaga observed.
The Central Bank’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 the coronavirus.