COLUMN: FINANCIAL MARKETS. CRDB rallies 13pc in a week, reaches 1,130/-

IN a week marked by both central bank treasury bond auction and pivotal earnings releases, Tanzania’s equity market displayed vigour, with total turnover surging by 45.6 per cent week-on-week to 24.0bn/-.

This rebound in activity, particularly significant given that it occurred during a week with a treasury bond auction, I found particularly interesting.

Notably, the upswing in equity turnover was possibly anchored by the release of financial statements from key banking institutions, most notably CRDB, NMB, MBP and MKCB, which acted as powerful catalysts for capital rotation into equities.

As has become a familiar pattern, the market’s breadth remained narrow, yet impactful. Tanzania Breweries Limited (TBL) and CRDB Bank Plc continued to dominate market flows.

TBL accounted for 17.625bn/- of total turnover, 73.5 per cent of the week’s equity market activity, primarily driven by institutional block trades executed across trading session. CRDB followed with 10.5bn/-, making up 20.18 per cent of turnover and signalling sustained retail and institutional enthusiasm for the counter.

Unsurprisingly, despite TBL maintaining its position as the most dominant in absolute value terms, CRDB led in transaction count, with 3,711 out of the week’s 6,345 deals. Behind them in equity turnover were KCB Bank (1.111bn)/-, NMB Bank (254.154m/-) and Afriprise (177.662m/-), while secondary participation from TPCC, VODA, NICO, DCB and MKCB demonstrated continued depth in the broader equity landscape.

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The concentration remains pronounced, the top five counters accounted for 98.82 per cent of weekly equity turnover, reinforcing persistent concentration risk but also signalling where confidence is currently consolidating. Topping the week’s gainers list was Mkombozi Commercial Bank (MKCB), which surged by 16.67 per cent to 1,540/-.

Investors appear to have responded positively not only to the earlier dividend announcement but also to the recently published Q2 financial results, which revealed a 7.41bn/- profit after tax and a book value per share of 2,016/51, implying the stock may be undervalued relative to its net asset base.

Furthermore, MKCB trades at a P/E ratio of 2.45, a discount relative to CRDB (4.15x) and NMB (5.16x). However, it’s not without caveats.

The bank’s cost-to-income ratio (CIR) stands at 60.54 per cent, exceeding the BOT’s threshold of 55 per cent, while its Loanto-Deposit Ratio (LDR) of 79 per cent sits comfortably within the regulator’s preferred range of 60–80 per cent. Importantly, MKCB’s NPL ratio is just 3.0 per cent, below BoT’s 5 per cent threshold and signalling prudent credit risk management.

This signals that the bank is still maturing operationally, but with clear balance sheet strength and improving earnings quality. CRDB, meanwhile, continued its ascent, gaining 13 per cent on the week and closing at 1,130/- per share.

The bank not only delivered strong earnings but also captured the largest share of retail trading activity and notably, was the only bank to transact on the pre-arranged block trade board, signalling confidence.

CRDB’s valuation continues to attract attention, trading at a still-attractive P/E multiple of 4.15x, with growth optionality embedded in its regional subsidiaries, for instance CRDB DRC, CRDB Burundi, which currently contribute marginally to group profits.

Other gainers included SWIS (+14.01 per cent), NICO (+13.89 per cent) and MBP (+7.14 per cent), each benefiting from either favourable investor sentiment or fundamental news flow.

On the declining side, Afriprise dropped by 5.88 per cent to 400/- per share, while TBL shed 3.89 per cent to 9,130/-.

Yet, the overall market tone remains constructive, particularly as equity valuations benefit from the continued decline in interest rates. Turning to fixed income, the 10-year government bond auction held on 30th July confirmed ongoing yield compression, with the Weighted Average Yield falling from 14.259 per cent to 13.736 per cent.

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Despite the reduction in both coupon rate (now set at 13.50 per cent) and yield, investor demand remained elevated, the auction was oversubscribed and the Central Bank took in 158.22bn/- in successful bids against an offer of 146.48bn/-. Investor appetite holding firm in the face of declining yields suggests that the market is increasingly aligned with the central bank’s policy signalling.

With inflation stable and the policy rate (CBR rate) recently cut to 5.75 per cent, liquidity remains abundant and fixed income investors are reallocating accordingly. The central bank’s move to lower the policy rate and maintain the 7-day interbank rate within the 3.75 per cent–7.75 per cent corridor is beginning to show up more clearly across asset classes. And the market is participating in this easing cycle.

This is crucial because as yields compress and interest rates move lower, discount rates used in valuing equities fall, thereby mechanically raising the net present value of future cash flows, thus driving up valuation for equities, particularly in sectors and companies with solid earnings visibility and balance sheet strength. Monetary easing appears to now be acting as an accelerate to equity valuations.

Concentration risk remains high and while large caps may provide liquidity and visibility, under-researched names such as MKCB may offer asymmetrical upside if due diligence is conducted thoroughly.