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The East African : November 18th 2013
MONEY AND EQUITY MARKETS NOVEMBER 16-22,2013 GOOD NEWS FOR INVESTORS Tanzania’s banks show strong profit growth as borrowing increases Reduced costs, inc≥eased uptake of loans in the pe≥iod ending August cont≥ibuted to the pe≥fo≥mance By STEVE MBOGO Special Correspondent T anzania’s top lenders have excited investors with their strong profit growth in the third quarter signalling increased earnings for the full year. Four banks — National Microfi- nance Bank (NMB), CRDB, Bank M Tanzania and DCB Commercial Bank — posted an increase in profits, riding on reduced costs, increased uptake of loans and higher interest expenses during the period. Analysts also attributed the growth to higher profit margins. Their robust bottom-line growth, analysts and bankers said, was a strong indication of improved performance in the whole industry. NMB saw its after-tax profit grow from $20.4 million for the third quarter from the $17.5 million recorded in the similar period last year. CRDB grew its net profits slight- ly to $12.7 million from $12.5 million in the same period last year. On its part, Bank M Tanzania registered a profit growth of $2.6 million, an increase of 30.7 per cent compared with the previous year’s figure of $1.8 million. DCM Bank posted pre-tax profits of $1.55 million in the third quarter, an improvement from the pre-tax profit of $868,700 posted in the second quarter of 2013. However, Maendeleo Bank, which is newly listed at the Dar es Salaam Securities Exchange, posted an operating loss of $79 million in the third quarter of 2013. Although there are mixed driv- ers of growth in the banking sector, an analyst said that, in addition to a growing economy, more Tanzanians are opening bank accounts as a result of improving living standards and formalisation of the economy. “People with disposable income are increasing and this means more people opening accounts,” said Aga Masambu, the general manager of Rasilimali Ltd, a Dar es Salaam-based investment bank. Banks are also reducing their Business watch REA Vipingo Plantations Ltd offers to buy out stakeholders as it eyes bourse exit REA Vipingo Plantations Ltd, the biggest shareholder of the REA Vipingo Firm listed on the Nairobi Securities Exchange, has offered to buy out other stockholders in the Kenyan sisal producer in a move that could see the firm exit the Nairobi bourse. The company will be delisted on acceptance of the offer by 90 per cent of shareholders. REA Trading Ltd, which owns 57.04 per cent of the company, offered US cents 46 a share to remaining stockholders, at the end of the week according to reports by the NSE. This is up from a share price of US cents 32 last week Monday when REA Vipingo was valued at Ksh2.4 billion ($28.2 million). Tanzania’s current account deficit for the year to September widens by 26.1pc Tanzania’s current account deficit widened by 26.1 per cent in the year to September, blamed on the falling value of aid and loans coupled with rising imports value. The country’s total bill for imports of goods and services rose 2.9 per cent in the period to $13.319 billion while the value of its exports of goods and services fell 1.4 per cent to $8.242 billion as the value of traditional exports declined by eight per cent. Britam eyes EA’s real estate market with acquisition of 25pc stake in Acorn Group Nairobi bourse listed financial services firm Britam has acquired a 25 per cent stake in real-estate company Acorn Group in a move that will see the two companies partner to tap into opportunities offered by the real estate industry in Kenya and East Africa. The partnership will provide access to property A construction site. The sector was one of the top borrowers, pushing up growth in Tanzania’s banking sector. Picture: File operational expenses by deploying information technology platforms. The financial statements released so far reflect growing interest income, indicating increased borrowing. Top borrower According to the latest Monthly Economic Review by the Bank of Tanzania, lending for major economic activities increased in the year ending August 2013 with the construction industry leading in borrowing. The sector borrowed 41.8 per cent of the total banking loans in August, compared with 34 per cent of total banking loans in the same month in 2012. Credit to sectors like trade, man- ufacturing and transport and communication also grew, but credit to the crucial agriculture sector declined to 4.6 per cent in August compared with 31.7 per cent in August 2012. The bank did not provide an explanation for this drastic drop. “The banking sector is continu- ing to benefit from the growing economy and I expect this growth to continue based on a positive economic growth forecast,” said Mr Masambu. He said one of the The construction industry was the lead borrower with 41.8pc of the total banking loans in August, compared with 34pc of total banking loans in the same month in 2012 signs of growth is the setting up of new banks, cross border expansion by Tanzanian banks and foreign banks setting up branches. He said the banking sector counters at the DSE have also had a strong showing, including a new bank listing. In late October, Maendeleo Bank held its initial public offering for eight million shares with a green shoe option or the option to increase the shares on offer to 1.2 million. The bank listed under the DSE’s alternative market window known as EGM. Another bank, Mwanza Commu- nity Bank, will be the second firm to list at the DSE through the EGM in December, bourse officials said. In June, UBL Bank (Tanzania), a Pakistan bank was licensed to operate. Among the expected new entries is that of Tanzania Teacher’s Union (TTU) in December to enable teachers to access affordable loans, according to the TTU president Gratian Mkoba. The World Bank forecasts a posi- tive economic growth for 2013-15 of above seven per cent, meaning banks will continue to benefit. “The boom in natural gas production may eventually result in an even higher rate of growth, but this will not occur for seven to 10 years,” notes a review of the country’s growth prospects by the Bank. In May, the International Mon- etary Fund also gave a positive outlook for the banking sector noting that it is “sound, profitable, and liquid.” development, property investment and real estate-backed investment products all under one roof. Currently, Acorn is managing a portfolio of 25 projects valued at over Ksh20 billion ($232.5 million) in Kenya, Uganda and South Sudan. Al Futtaim seeks to grow CMC’s brands across region in its acquisition plan 53 Ford pickups are a CMC brand. Picture: File Al Futtaim, a Dubai-based vehicle auto firm, seeks to expand CMC’s brands in Kenya and the region in a bid to grow its earnings potential in an acquisition plan that could save CMC shareholders their money. Analysts at Old Mutual Securities said the conditions set by Al Futtaim before the acquisition deal point to the Dubai firm’s bid to refine CMC’s business operation model. CMC has been operating at a loss for the past two years. Al Futtaim proposes no dividend payments to shareholders and no trading of CMC’s shares at the Nairobi bourse. Rwanda’s first sovereign fund pools $29.5m to fund development projects Rwanda’s first sovereign fund has pooled Rwf20.2 billion ($29.5 million) from individuals and corporate companies as the country struggles to become self reliant in funding its development programmes. Donors pulled their support in 2012 over allegations that the country was supporting the M23 rebel group in DR Congo. Some of the donors have since resumed their support.
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