Unable to compete in the market, at least five banks collapsed or were merged with stronger banks while others, especially those in Tier 1 like CRDB Bank Plc, saw their profits tumble. From a pre-tax profit of over 90bn/- in 2016, the country’s largest commercial bank by net assets value, deposits and loan portfolio, witnessed its profits plummet to 36.2bn/- in 2017.
But last year when Abdulmajid Nsekela took over as Group CEO and Managing Director from veteran banker, Dr Charles Kimei who retired, the bank seems to have rediscovered its super profit making ways.
East Africa’s third-largest lender, last week announced a 77 percent jump in pre-tax profit, buoyed by increased revenues and operational efficiency. Announcing the results in Dar es Salaam, Nsekela said the lender’s operating profits rose 85 percent to reach 99.1bn/- compared to 53.1bn/- posted in 2017. The bank’s profit after tax more than doubled to 64.1bn/- from 36.2bn/- made last year.
“We have focused on improving our revenues by optimising all our business units, investing in the right technologies and the people, while at the same time, improving our processes,” Nsekela said.
Building the economy
The Group CEO said the lender is banking on providing reliable financial solutions to key sectors in the economy, with special focus on productive sectors such as agriculture, manufacturing and retail trade. “We want to leverage our financial strength and a dynamic customer base to create a business ecosystem that will spur economic growth,” Nsekela noted.
CRDB Bank has an array of sector-specific products including Fahari Kilimo, which targets to provide loans to smallholder farmers to enable them undertake their farming activities smoothly. “We have developed specialised products especially for the agricultural sector because we know that given adequate support, the sector has a multiplier effect on livelihoods and the economy,” the youthful chief executive explained.
Using new accounting tools, coupled with a robust know your customer process, CRDB Bank targets to provide credit facilities to customers based on their productivity and ability to repay.
The CEO is upbeat that these new mechanisms and approaches will go a long way in augmenting government efforts in mainstreaming the various informal economic activities and generate more revenue through taxes.
During the financial year, the bank recorded an efficiency ratio of 66.7 percent, in what Nsekela terms as deliberate attempt to increase earnings. According to the nascent CEO, the good results are a harbinger for a more aggressive sales program, which the bank targets to implement this year.
The program will be realised under broad branch transformation agenda, which will focus on improving sales and staff productivity. The ambitious agenda entails franchising 29 mini service centres to FahariHuduma agents and migrating customers to digital channels such as ATMs, SimBanking, Internet banking, Point of Sale (POS) and CRDB Wakala.
“Branch transformation will free up bank staff from doing clerical work and allow them to do sales or cross-sale activities,” he stated.
Primarily though, CRDB Bank is looking to widen its reach and deliver banking services in every part of Tanzania and Burundi, where it has a subsidiary. The Group CEO said that the lender has put in place a very full-bodied plan to drive financial inclusion, in partnership with other entities including the government.
The plan follows the realisation of the bank’s strong position of influence and Nsekela said it is increasingly becoming imperative for the lender to champion the financial inclusion agenda, which portends greater involvement of the citizenry in economic building.
Obviously, the 2018 financial year results have put CRDB Bank in an enviable position as it commanded an impressive market share in deposits at 23.3 percent, to close at 4.7trn/- and assets at 6trn/- representing a 20.2 percent market share.
Increased shareholder value
Investors and shareholders are expected to enjoy the good tidings, even as the CEO commits to improving shareholder value. While announcing the 2018 results, Nsekela proposed a 60 percent increase in dividend payout of 8/- to shareholders per share, 5/- paid out in 2017. “I believe we are well positioned for success in 2019 because our objective is to deliver a handsome profit after tax and a competitive dividend payout in 2019,” he added.
During the year, CRDB Bank’s loan portfolio stood at 3.1trn/-, with a shareholder equity of 774bn/- while its ratio of nonperforming loans, as a percent of total loans, stood at 8.5 percent compared to 12.6 percent reported in the previous year.