TADB profit jumps on lending, loan quality

DAR ES SALAAM: Tanzania Agricultural Development Bank (TADB) has reported a significant surge in profitability for the year ending December 31, 2024, fueled by robust growth in net interest income from increased lending activities.

According to its audited financial statement, the state-backed lender focused on agricultural development saw its net profit jump by 37.2 per cent to 18.61bn/- up from 13.56bn/- in the previous year.

The robust earnings growth was primarily driven by a substantial 40.7 per cent increase in net interest income, which soared to 50.14bn/- in 2024 from 35.6 billion shillings in 2023.

This significant expansion in net interest income was underpinned by a strong 45.9 per cent rise in interest income, reaching 57.54bn/- compared to 39.43bn/- in the prior year, reflecting the bank’s success in expanding its loan book.

Additionally, non-interest income played a crucial role, registering a significant 25.6 per cent increase to 9.71bn/- from 7.73bn/-. Within this category, fees and commissions generated from increased transaction volumes and service offerings saw a notable jump of 55.2 per cent to 3.28bn/- from 2.12bn/-.

Furthermore, gains from foreign currency dealings and translation activities also contributed significantly to the non-interest revenue growth, rising by 67.7 per cent to 587m/- from 350m/- in the previous year, indicating favorable market conditions and effective treasury management.

Notably, TADB appears to have improved the quality of its loan portfolio. While non-performing loans and advances saw a modest increase of 13.5 per cent to 14.5bn/-, the ratio of non-performing loans to gross loans decreased sharply by 28.9 per cent to 2.7 per cent. This suggests that the bank’s lending activities expanded at a faster pace than the growth of its problematic loans, indicating more effective credit risk management.

On the balance sheet, TADB experienced significant expansion, with total assets growing by 51.2 per cent to 917.4bn/-. Loans, advances, and overdrafts (net of allowances) also saw strong growth of 61.5 per cent, reflecting increased lending to the agricultural sector. Allowances for probable losses increased by 9.7 per cent, a prudent measure given the expanding loan book.

However, a conspicuous trend emerged with a substantial 16.6 per cent decline in special deposits to 72bn/- from 86.3bn/- in 2023. Given TADB’s role as a government-funded development bank, this decrease likely reflects the utilization or reallocation of specific government funds earmarked for the institution’s activities, rather than a reduction in traditional customer deposit.

Despite the strong profit growth and improved loan quality metrics, key profitability ratios such as Return on Average Total Assets (3.00 per cent) and Return on Average Shareholders’ Funds (4.00 per cent) remained unchanged from the previous year.

This suggests that while profits increased significantly, they were proportional to the substantial growth in the bank’s asset and equity base.