DCB Commercial Bank hopes to boost its capital by 57 per cent to 26.7bn/- up from 16.9bn/- after a successful rights issue launched in November last year under which the shares offered were oversubscribed.
The bank tapped its shareholders and new investors to raise 8.9bn/- through the rights issue but the results exceeded their expectation underlining a vote of confidence by shareholders and new investors on the bank’s long-term growth strategy.
The Dar es Salaam Stock Exchange (DSE) listed bank is now expecting to raise 9.6bn/- up from 8.9bn/- target after managing to sell 36.6 million additional shares surpassing the target of selling 33.9 million shares, equivalent to 108 per cent.
In the rights issue where shares were offered at a discount price of 265/- per share, or 22 per cent down from its price of 340/- in November, a total of 23.6 million shares were sold to existing shareholders that include municipal councils in Dar es Salaam. The remaining 12.9 million were sold to new investors.
Speaking during the listing of additional shares of the bank on the stock market last Friday, the Deputy Minister for Finance and Planning, Ashatu Kijaji said the success in their rights issue proved that the banking sector was strong and stable.
She called upon other banks and financial institutions to list on the stock market so as to shore up their capital by raising longterm funds.
It was high time banks and financial institutions boosted their capital by listing on the Dar es Salaam Stock Exchange, she said noting however that only eight per cent of the banks had listed at the bourse so far which did not bode well with modern running of banking and financial sector.
“We have no reason of suspending bank licence for lack of capital while it can be obtained in the stock market,” she said. The Bank of Tanzania (BOT) revoked banking licence of Covenant Bank, Efatha Bank, Njombe Community Bank, Kagera Farmers’ Cooperative Bank, and Meru Community Bank last year after they were deemed to be critically undercapitalised.
The DCB Bank Managing Director, Godfrey Ndalahwa said the bank managed to make 1.6bn/- profit in the 2018 financial year up from 6.9bn/- loss in 2017 thanks to a turnaround strategy adopted to return to profitability.
He said the bank had presented good performance in 13 out of 17 years of its operation and they were optimistic of continuing with strong performance in the future.
The performance is a result of cost cutting measures that saw reduction in operating costs and enhancement of efficiency through digital service, controlling of non-performing loans and improvement in branch network.
Mr Ndalahwa had said during the launch of the rights issue last year that the bank had set up a five-year strategic plan to maintain profitability which was being implemented in three phases.
The first phase covered January to June last year was mainly a turnaround phase which focused on operational changes which helped to cut operating costs.
“The reduction in operating costs and the proportion of revenue and expenditure from 104 per cent in 2017 to 81 per cent in 2018 has been a success,” he said.
According to him, as part of the strategy, non-performing loans are set to drop to a single digit by the end of 2019.
The second phase is transformation and consolidation where the bank is focused to deliver a profit before tax of 1.8bn/- by the end of December 2018, he said.
According to him that will be achieved while proactively managing all key risks to ensure the bank is more resilient and strong enough to absorb volatile business environment, whilst ensuring compliance with minimum regulatory requirements.