TIB Development Bank Q1 profit rises on FX trading

DAR ES SALAAM: TIB Development Bank reported a surge in quarterly profit driven by robust gains in foreign currency trading, masking which offset growing concerns about the performance of its core lending business. The bank’s after-tax profit reached Tshs 14.28 billion, a sharp increase from Tshs 8.22 billion in the similar quarter last year. The …

DAR ES SALAAM: TIB Development Bank reported a surge in quarterly profit driven by robust gains in foreign currency trading, masking which offset growing concerns about the performance of its core lending business.

The bank’s after-tax profit reached Tshs 14.28 billion, a sharp increase from Tshs 8.22 billion in the similar quarter last year.

The growth was largely fueled by a spike in non-interest income, particularly from currency transactions.
Non-interest income soared 440.9 per cent to Tshs 18.33 billion with foreign currency dealings and translation surging 559.1 per cent to Tshs 16.97 billion from Tshs 2.575 billion last year.

However, the bank’s traditional lending business faced headwinds. Net interest income, a key indicator of profitability from traditional lending, plummeted 69.3 per cent to Tshs 1.147 billion from Tshs 3.732 billion in a corresponding period last year.

Interest income declined 29.1 per cent, while interest expenses rose 12.9 per cent. This indicates significant pressure on the bank’s ability to profit from its primary business.

Operating expenses also increased, with non-interest expenses rising by 37.7 per cent to Tshs 5.305 billion. Salary and benefit costs increased by 20.3 per cent, and other operating expenses rose by 91.2 per cent. The increase in these costs further reduced profitability from core operations.

The bank also reported a slight increase in non-performing loans and advances, which rose by 4.5 per cent to Tshs 92.284 billion. The ratio of non-performing loans to gross loans edged up to 21.9 per cent, from 21.6 per cent.

This is clearly above the Bank of Tanzania threshold of 5 per cent, suggesting that more borrowers are failing to meet their loan repayment obligations, which raises the risk profile of the bank.

TIB Development Bank’s performance is reflected in several key indicators. Return on average total assets (ROA), which measures how effectively a bank uses its assets to generate profit, improved to 2.90 per cent (1.90 per cent).

Return on average shareholders’ funds (ROE), which shows how much profit a bank generates for each unit of shareholders’ equity, also increased to 11.90 per cent (7.50 per cent).

However, net interest income to average earning assets, which indicates how profitable a bank’s earning assets (such as loans) are, decreased to 0.20 per cent (0.70 per cent).

TIB Development Bank’s quarterly results were bolstered by exceptional gains in foreign currency trading.

While this boosted the bottom line, the decline in core lending profitability and rising operating expenses raise questions about long-term performance.