Nonperforming loans (NPLs) have fallen among large commercial banks amid declining profits as the banking industry looks to emerge from two years of operational challenges.
Financial reports of eight major banks published yesterday generally show a significant fall in NPLs during 2017 compared with 2016.
The banking industry went through a rough patch in the last two years, a situation that was largely blamed on a liquidity squeeze which resulted in reduced lending to the private sector.
With tight liquidity in the economy, borrowers failed to honour their obligations, resulting in high NPL levels.
By the end of December 2016, the NPLs to total gross loans ratio had risen to an average of 9.5 percent from 6.4 percent in 2015, much higher than the acceptable threshold of five percent.
But in what is seen as a sign of an impending change of fortunes, NMB Bank’s NPLs dropped from 9.3 percent during the third quarter of 2017 to 6.4 percent in the last quarter. Barclays Bank Tanzania’s results show that NPLs shrunk to 8.5 percent during the fourth quarter of 2017 from 11 percent in the previous quarter.
Bank M’s ratio dropped to 6.5 percent in the last quarter of 2017 from 7.1 percent in the preceding quarter, while Standard Chartered Bank’s NPLs fell to 8 percent from 8.5 percent. As for CRDB Bank, NPLs slowed to 13.4 per cent from 14.4 percent. The National Bank of Commerce (NBC) saw a drop to 12.4 per cent in the fourth quarter from 13.4 percent in the previous quarter.
Stanbic and Citibank’s ratios remained unchanged at 4 percent and 0.1 percent, respectively, while that of Standard Chartered Bank’s fell from 8.5 to 8 percent.
However, the fall in NPLs came at a cost, with most banks also reporting falling profits. NMB Bank’s net profit plunged to Sh95 billion in 2017 from Sh154 billion in the previous year. Citibank’s annual profit fell to Sh14.3 billion from Sh20 billion in 2016, while CRDB’s net earnings dropped from Sh74 billion in 2016 to Sh69 billion last year.
NMB managing director Ineke Bussemaker said in her statement that the decline was due to provision for credit losses reflecting setbacks customers had to contend with. The bank was particularly hit hard by the government’s decision to dismiss public workers said to possess fake academic and professional certificates.
Bank M’s net profit dropped to Sh12 billion from Sh16.6 billion in 2016.
Barclays Bank was last year’s best performer, having emerged from a loss of Sh8.7 billion in 2016 to post a Sh10.9 billion profit last year.
Stanbic Bank’s net earnings rose sharply to Sh25 billion in 2017 from Sh18 billion in 2016, while Standard Chartered Bank’s profit soared to Sh39 billion from Sh28.
NBC registered a net profit of Sh15.4 billion last year from Sh13.8 billion in 2016.