Tanzania's top banks post higher profits in Q2 of 2021

A number of large banks in Tanzania have reported a significant improvement in profits and a further reduction in non-performing loans in the second quarter of 2021. According to a recent survey, the overall total assets and customer deposits of these top banks rose by more than 6.1% and 9.4% respectively. Prince Limophonega, a financial analyst, discussed these positive trends in a recent interview with CNBC Africa. Limophonega highlighted that the recovery and growth have primarily been driven by the top banks in the country. The assets of these banks have shown an average growth of about 6% from the first to the second quarter, with loans provided by the top 10 banks also experiencing growth. In contrast, the remaining banks in the market have witnessed a decline in loans. However, the smaller banks have seen an increase in their cash positions and interbank loan activities, showcasing a more conservative approach to risk management. Despite this cautious approach, the overall loans average has slightly declined in the second quarter of the year, indicating a positive trend in the market. Customer deposits have seen considerable growth, particularly in the top 10 banks, with individual customer deposits driving this increase. These top banks, which hold assets exceeding a trillion Tanzanian shillings, play a significant role in the country's banking sector, with the top two banks alone covering around 40% of the market share. The profitability of these banks has been supported by personal loans and loans in the tourism sector, while sectors like agriculture have experienced a decline in lending. Despite the challenges posed by the COVID-19 pandemic, the top banks have performed well, outperforming the rest of the market. The Central Bank has been proactive in implementing expansionary monetary policies to boost economic growth and increase lending in the market. This includes measures to reduce non-performing loans and ensure the availability of clean loans for borrowers. The focus on maintaining low NPL ratios has led to a slight decline in profitability for the general banking sector, but it is expected to translate into a reduction in the cost of borrowing for consumers. Overall, the positive performance of Tanzania's top banks in the second quarter of 2021 reflects a resilient and proactive approach to navigating the challenges posed by the pandemic and driving economic growth through increased lending and profitability.