Tanzania’s TPB stronger from latest bank merger

Photo: Asoko Insight

In Summary

The TPB Bank-TIB Corporate deal brings the total of registered commercial banks in Tanzania down to 37, excluding six community banks, two development banks, and five micro-finance banks.

The government of Tanzania is seeking to consolidate the country’s banking industry amid the coronavirus pandemic and appears to prioritise government over private sector control in all spheres of the economy, including finance.

State-run TPB Bank this week continued its meteoric rise in Tanzania's financial sector as it absorbed a third bank in the latest merger within the sector.

The TPB union with TIB Corporate Ltd, the commercial banking arm of the TIB Investment Group, is the fourth involving major Tanzanian banking institutions in the past two years, and places TPB Bank, formerly known as Tanzania Postal Bank, among the country's top 10 financial institutions in terms of assets.

TPB Bank’s assets base grew by 48 per cent to Tsh1 trillion ($435.65 million) after Treasury Registrar Athumani Mbuttuka announced its acquisition of all of TIB’s assets and liabilities with effect from June 1, 2020.

OPERATIONAL EFFICIENCY

In May 2018, TPB Bank took over the former Twiga Bancorp and, three months later (August 2018), it did the same with the Tanzania Women’s Bank (TWB).

Both, like TIB Corporate, were government-owned entities experiencing undercapitalisation issues. Twiga and TWB had been put under statutory management of the Bank of Tanzania in 2016.

According to Mr Mbuttuka, the TPB Bank-TIB Corporate merger marks another step towards establishing a single state-owned commercial bank to compete with an increasing number of private banks.

He said the objective was to continue to improve the operational efficiency of banks currently owned by the bank to begin with.

INDUSTRY CONSOLIDATION

“The merger aims to bring about major reforms in operations, systems and structure so TPB Bank can become formidable competitors in the financial industry,” Mr Mbuttuka added.

The TPB Bank-TIB Corporate deal brings the total of registered commercial banks in Tanzania down to 37, excluding six community banks, two development banks, and five micro-finance banks.

Top Tanzanian commercial banks now in terms of capitalisation are CRDB, NMB (National Microfinance Bank), National Bank of Commerce (NBC), Stanbic (Tanzania), Standard Chartered, TPB Bank, Diamond Trust, Exim Bank, Azania Bank and Citibank (Tanzania).

Also in August 2018, Azania Bank’s acquisition of Bank M allowed it to become Tanzania's leading mortgage lender with a 22 per cent market share which put it ahead of Stanbic Bank, CRDB and Azania Bank.

The government of Tanzania is seeking to consolidate the country’s banking industry amid the coronavirus pandemic and appears to prioritise government over private sector control in all spheres of the economy, including finance.

The latest merger has allowed TPB Bank to formally join the elite group of Tanzanian banks with an assets capitalisation of at least Tsh1 trillion. The bank's assets value as of March 31, was Tsh657.567 billion ($285.9 million).

TPB Bank registered a net revenue of Tsh4.694 billion ($2.04 million) in the first quarter of 2020.

By contrast, TIB Corporate registered a modest net revenue of Tsh41 million ($17,826) during the same period, putting it in need of recapitalisation as well as speedy measures to curb its excessive non-performing loans portfolio.

Financial sector mergers and acquisitions appear to have become a regional trend in recent years.

MORE TO COME

Kenya’s largest bank by assets, the KCB Group, last year acquired the National Bank of Kenya while two other Kenyan banks — Commercial Bank of Africa and NIC Bank — also recently concluded a merger creating the country’s third largest bank by assets.

Also in 2019, Nigeria’s largest retail lender, Access Bank Plc, acquired Kenya’s Transnational Bank and loss-making Mayfair Bank was sold to the Egypt-based Commercial International Bank just two and-a-half years after starting operations.

A merger deal between CBA Bank and NIC Bank in April of last year also put their respective Tanzanian subsidiaries in line for consolidation.

“We are not done yet and there are all indications of more market-driven consolidations in the banking sector,” Central Bank of Kenya governor Dr Patrick Njoroge was quoted saying recently.

In Kenya and Tanzania, the top five banks account for 46 per cent and 55 per cent of financial sector assets, respectively.

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