Tanzania: The astonishing tale of three banks

Tanzania’s banking industry has more than doubled in assets and almost quadrupled in loans in the past five years, indicating an increased take-up of financial services among the population.

The number of reporting banks also grew from 33 to 41.

This is according to a report by Serengeti Advisors, a Dar es Salaam-based financial consultancy firm, titled Tanzania Banking Survey 2011.

In 2010, the industry’s total assets were estimated at $10.4 billion, up from $4.5 billion in 2006. Banks are also increasingly more confident to lend — in 2006, total industry loans were only worth about $1.4 billion. By 2010, this had climbed to $4 billion, an astonishing 237 per cent increase.

Deposits have grown from $3.6 billion in 2006 to $8.4 billion by the end of last year. Industry revenues have also swelled from $98 million in the first quarter of 2006 to $223 million in the last quarter of 2010.

This upward trend is in line with predictions by the Economic Intelligence Unit, a London based economic consultancy firm, which estimates that by 2020, Tanzania’s banking industry will be worth $28 billion.

But the growth is uneven among the reporting banks, with the top three banks by asset base— FBME Bank, CRDB Bank and National Microfinance Bank — together accounting for 40 per cent of industry capital and 52 per cent of deposits. The three also account for almost half of all loans and half of all employees in the banking industry.

FBME Bank, the top bank by assets, was only set up in Tanzania in 2003, but it has overtaken many older and more established firms. A privately-owned bank with roots in Lebanon, it boasts an asset base of $2 billion, a market share of 19.3 per cent. FBME is also the industry leader in terms of deposits, at $1.8 billion. However, the bank has only four branches and 308 employees — contrast this with the third-ranked bank by assets, National Microfinance Bank, which has 138 branches and 2,610 employees. This implies that FBME Bank deals in a relatively small number of very high volume transactions.

Second by assets is CRDB Bank, established in 1996. The bank has been profitable every year since its foundation. CRBD has been most aggressive in lending — last year, the bank loaned $764 million, 23.6 per cent more than National Microfinance Bank, second-ranked in loans.
In addition, CRDB leads the banking sector in total revenues at $36 million. However, non-performing loans have dampened the bank’s profits, which account for 11 per cent of the company’s lending book. The company was listed on the Dar es Salaam stock exchange two years ago.

Although it is ranked third in terms of assets and in deposits, National Microfinance Bank is the most profitable bank in Tanzania, reporting a net profit of $8.6 million in 2010, a staggering 44 per cent of the total net profit of the industry. This has been boosted by a plunge in non-performing loans from over 9 per cent in 2008 to 2.5 per cent in 2010.

The bank has the widest reach in the country, boasting the greatest number of branches at 138. It also accounts for nearly a quarter of all employees in the banking industry, as well as investing the most in government securities, at $429 million.

The Government of Tanzania has a 31.7 per cent stake in the company, with publicly listed shares accounting for 20 per cent of the bank’s ownership.