DAR ES SALAAM: THE banking sub-sector remained sound and stable in terms of capital adequacy, liquidity, asset quality and profitability, the Bank of Tanzania (BoT) said on Tuesday.
According to BoT’s annual Banking Supervision report 2023, core and total capital adequacy ratios were 17.7 per cent and 18.4 per cent respectively, compared to 17.9 per cent and 18.7 per cent, recorded in the preceding year, respectively.
“The decrease in capital adequacy ratios was attributed to increase of risk-weighted assets, but above the minimum regulatory requirements of 10 and 12 per cent for core and total capital, respectively,” the BoT report showed.
The report said asset quality improved as reflected by a decline in level of non-performing loans (NPLs) ratio to 4.4 per cent from 5.8 per cent recorded in 2022.
The improvement in asset quality, BoT said, was due to improved credit risk management practices by banks and financial institutions as well as measures instituted by the bank.
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“The ratio of liquid assets to demand liabilities was 28.8 per cent compared to 26.1 per cent recorded in 2022, being above the minimum regulatory requirement of 20 per cent,” BoT report stated.
The growth was attributed to increase in liquid assets including cash, bank balances with other banks and short-term investments. According to the central bank report, profitability improved as depicted by increase in return on assets (ROA) and return on equity (ROE) to 4.4 per cent and 20.5 per cent from 3.5 per cent and 14.2 per cent recorded in preceding year, respectively.
“The increase in profitability was driven by a rise in interest income consistent with growth in loan portfolio, increase in noninterest income and improvement in operational efficiency,” stated the report.
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The ratio of net open position to core capital increased to 4.5 per cent from 2.5 per cent reported in the preceding year, implying moderate exposure to foreign exchange risk. During the period, the total assets increased by 17.8 per cent to 54.39tri/- from 46.15tri/- recorded in the preceding year, which was mainly attributed to the increase in deposits, borrowings and retained earnings. Deposits increased by 16.9 per cent to 38.07tri/- from 32.58tri/- recorded in the preceding year.
“The increase was mainly on account of increased public confidence in the banking sector, favourable economic activities and deposit mobilisation strategies instituted by banks and financial institutions,” the report said.
The BoT report said loans, advances and overdrafts increased by 22.7 per cent to 32.01tri/- which accounted for 58.9 per cent of total assets. The observed growth was attributed to favourable macroeconomic environment, the Bank’s sustained accommodative monetary policy and regulatory measures taken to boost private sector’s credit.
