TANZANIA – NCBA Group, a financial services conglomerate in East and West Africa, has announced that it is investing KSh2 billion (US$16.6 million) in its Tanzanian subsidiary this year to shore up its capital which was eroded by losses and a rise in defaults due to the economic fallout from the Covid-19 pandemic.
The new capital injection into NCBA Bank Tanzania Limited is part of efforts to improve the performance of the regional subsidiaries that have recorded lower profitability compared to the mainstay Kenyan market.
“We have made Ksh1 billion (US$8.3 million) investment in Tanzania so far to support capital and we intend to continue with more investment and make another close to Ksh1 billion (US$8.3 million) by the end of the year,” NCBA chief executive John Gachora said.
“We had closed four branches this year. We don’t plan to open the branches but what we are doing is reconfiguring the business to go after corporates and we need to lend them more money and therefore need more capital to do so. The investment is really to support business growth in Tanzania.”
The Tanzanian subsidiary made a net loss of Ksh1.1 billion (US$9.2 million) in the year ended December 2021, larger than the Ksh770 million (US$6.4 million) net loss recorded the year before.
The performance was attributed to an increase in bad loans and provisions for the same. The subsidiary’s non-performing loans ratio stood at 20.3 percent which is significantly above the recommended level of five percent.
The bank was also slightly above other capital requirements, constraining its ability to lend more. The new funds are expected to recapitalise the business and put it on an expansion path.
The recapitalisation is being accompanied by a review of operations and client focus to fast-track the move to profitability.
NCBA Bank Tanzania is now pivoting to serve large businesses while closing excess branches in specific locations.
Standard Chartered Tanzania also recently announced it will exit the retail banking business and retain institutional banking, indicating that the mass market is less profitable.
The new capital being deployed in Tanzania will raise the Nairobi Securities Exchange-listed firm’s cumulative investment in that market to Ksh7 billion (US$58 million) from the Ksh5 billion (US$42 million) recorded at the end of last year.
The Kenyan banking multinational owned a 93.44 percent stake in the Tanzanian unit as of December 2021 and it was not immediately clear whether the minority shareholders are also participating in the recapitalisation.
NCBA Group partners Huawei
Meanwhile, NCBA Group is partnering with Chinese technology firm Huawei in order to roll out its digital banking products for its customers.
John Gachora, managing director of NCBA Group said that that the Chinese company has the competence in developing digital mobile applications that allow financial transactions to take place between local and most major foreign currencies.
“Our partnership will result in a digital bank with a global payments platform geared towards enhancing customers’ experience,” Gachora said when NCBA Group released its half-year financial results ending June 30.
Gachora said that NCBA Group will accelerate its drive toward digital banking because it will enable the lender to enhance its operational efficiencies by allowing clients to access financial services anytime and anywhere.
He believed that digitalization will also enhance the bank’s ability to serve the growing Chinese community in East Africa by facilitating seamless settlement of financial transactions between East Africa and China.
NCBA Group is already supporting a number of Chinese firms that are undertaking infrastructure projects in East Africa through trade finance products.
NCBA Group currently has operations in Kenya, Rwanda, Tanzania, Uganda and Cote d’Ivoire.
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