Azania Bank profit surges on lending boom

DAR ES SALAAM: Azania Bank saw its profit after tax surge by over 50 per cent in the quarter ending March 31, 2025, propelled by a significant expansion in its lending activities that more than compensated for a sharp decline in non-interest income.

According to the bank’s latest financial statement published yesterday, the Dar es Salaam-based lender reported a net profit of 11.06bn/-, a substantial increase from the 7.30bn/- recorded in the same period last year.

Azania Bank’s robust profit growth was primarily fueled by a strong 55.21 per cent jump in net interest income, which reached 35.49bn/-.

This surge was driven by a significant 36.78 per cent increase in interest income, indicating a healthy expansion of its loan portfolio or improved yields on its earning assets.

While interest expenses also rose by 20.51 per cent, the growth in interest income far outpaced it.

However, the bank experienced a notable downturn in its non-interest income, which fell by 32.26 per cent to 6.87bn/-.

This decline was largely attributed to a significant drop in foreign exchange profit which fell by 46 per cent and a substantial decrease in other operating income which declined by 94 per cent.

Fees and commissions saw a modest increase, but it was not enough to offset the overall decline.

Operating expenses also increased, rising by 20.73 per cent to 21.90bn/-. While this increase is notable, it remained below the growth rate of net interest income, contributing to the overall improvement in profitability.

Key profitability metrics reflected this positive trend. The Return on Average Total Assets (ROAA) improved to 2.22 per cent from 1.79 per cent, and the Return on Average Shareholders’ Funds (ROAE) saw a significant uplift to 13.95 per cent from 9.71 per cent.

The bank also saw a slight improvement in its asset quality, with the non-performing loans to gross loans ratio edging down to 5.66 per cent from 5.96 per cent.

Despite the strong profit growth, Basic Earnings Per Share (EPS) surprisingly decreased to 238/- from 627/-. This suggests a potential increase in the number of outstanding shares, which could dilute earnings per share even with higher overall profit.

On the balance sheet front, Azania Bank demonstrated healthy deposit growth of 8.07 per cent, a positive sign for future funding and lending capacity. However, its assets growth moderated to 6.78 per cent compared to a more robust 13.32 per cent in the same quarter of the previous year.

Overall, Azania Bank’s first-quarter results for 2025 showcase a significant improvement in profitability driven by its core lending business.

The bank’s ability to grow its loan portfolio and manage interest expenses effectively has been a key success factor.

However, the decline in non-interest income presents a blemish in an otherwise strong financial performance.

Investors will also be looking for clarification on the decrease in earnings per share despite the substantial profit increase.