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Some major banks in Tanzania are facing declining deposits after being weaned off government deposits which had been boosting their fortunes as they suffer from effects of low than expected regional trade.
According to some market players the banking sector is adjusting to tight liquidity squeeze made worse after the government decided to transfer its deposits from commercial banks to the central government. Lower regional trading has exacerbated the situation resulting into losses or declining profit in the third quarter.
Zan Securities Chief Executive Officer (CEO) Mr Raphael Masumbuko said banks are currently on state of shocks hampered by government own deposit policies and global economic affairs.
“The [banking sector] is in the shock,” Mr Masumbuko said, “the shocks are in two ways–the new directives and slowing down on global economy.” Early this year the government directed all its departments and agencies to transfer their revenue accounts from commercial banks to the central bank.
It is estimated that about 500bn/- was pulled out of the banks. To mobilize more deposits, banks rose average rate to around 10 per cent but still are facing liquidity crunch. The CEO said banking sector is dancing to the tune of economy happening thus affecting the ability to maintain deposits while loans repay back stability tumbles fast. “[However], once the economy stabilizes, the sector will also stabilize and continue to support it,” Mr Masumbuko said.
The latest monthly economic review report of BoT shows that annual growth of credit to the private sector slowed to 15.2 percent in July 2016 from 23.5 percent in July 2015. “The decline partly reflects the cautious approach taken by some commercial banks in providing credit as part of efforts in addressing the recent increase in non-performing loans,” the report shows.
Some banks including CRDB, Exim, TIB Development and Tanzania Postal Bank, posted NPLs of over 5.0 per cent. The TIB recorded the highest at 31 per cent. BoT said the slowdown was recorded in almost all major economic activities, with a notable deceleration in building and construction, manufacturing and hotels and restaurant.
On other hand most banks posted a decline in customer deposits. National Microfinance Bank (NMB), the largest in term of profitability, reported a slow growth of customer deposits that declined to 3.43tri/- in Q3 from 3.51tri/- in Q2.
National Bank of Commerce registered deposits decrease to 1.26tri/- from 1.33tri/-. TIB Development Bank went down slightly to 242.17bn/- from 243.8bn/-. On other hand CRDB, the biggest bank in term of balance sheet, deposits slightly increased to 3.98tri/- from 3.97bn/- and Exim Bank and Postal Bank (TPB) customer deposits increased to 674.29bn/- from 640.02bn/- and to 310.2bn/- from 294.6bn/- respectively.
Economists have it that the banks also are suffered from interregional trade slowing down as the country oil companies operating in Zambia, DR Congo, Burundi and Rwanda experienced slow businesses.
“These economies [especially copper producers] are facing foreign currency hardship after price slumping… to delay some payments of petroleum consignments,” an economist said. The economist, working in a leading bank, said political turmoil in DRC are also impacting negatively the banking sector as businesses have contracted to reduce liquidity ratio in the country.
“[Also] austerity measures on government spending on seminars, training had its toll on the economy– especially on hospitality and construction industries,” he said. The construction sector grew at a rate of 9.0 per cent in Q2 to 1.3tri/- compared to 1.2tri/- in same quarter last year.
Copyright 2016 actualité africaine