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NMB

Investees | Tanzania | NMB
Our initial stake in NMB Bank PLC (“NMB”) was acquired from one of our shareholders in 2017. NMB is the most profitable bank in Tanzania.
Country Overview

Tanzania is one of the top growth performers in East Africa, with an average real GDP growth rate of 6% over the past five years. Growth slowed in 2020, due to COVID-19 resulting in a slowdown in economic activity and weakened business confidence. The economy showed signs of recovery after experiencing supply chain disruptions, covid related challenges, and climate-related constraints, evidenced by an improvement in economic indicators. The economy recorded an estimated GDP growth rate of 4.6% in 2022, marginally higher than the 4.3% growth in 2021. The government’s efforts combined with the Bank of Tanzania’s proactive implementation of accommodative policies yielded an improvement in the business environment.

The agriculture and services sectors remain the key sectors in Tanzania however, the government continues to prioritise the energy, mining, and tourism sector. The country is amongst the fastest growing economies in Africa, with a projected GDP growth rate of 5.2% for 2023. Tanzania’s resurgence both economically and politically has brought a sense of stability to the country.

Banking Sector Overview

The banking sector is regulated by the Bank of Tanzania with a total of 34 commercial banks. The Bank of Tanzania has been instrumental in ensuring the sector remains stable while managing credit risks and implementing corrective measures. In 2021, various policy measures aimed at promoting banking activities and lowering interest rates were introduced to bolster the sector. The overall banking sector is well-regulated and recorded its highest performance improvement in 2021. The sector is expected to remain on this growth trajectory supported by the business-friendly approach of the new President and regulatory measures undertaken by the central bank.

The banking sector in Tanzania is dominated by five large banks, which account for over 70% of profitability. Other banks are smaller and have lower market penetration. Tanzania’s fragmented banking sector is dominated by two large banks, NMB and CRDB. These two banks, hold a significant share of the sector’s net profit, asset base, loan book, and customer deposits. NMB is the most profitable bank in Tanzania, consistently ranking ahead of peers with an average ROE of 20% over the period 2018-2022.

Historical Financial Performance

NMB experienced a turbulent period between 2016 and 2018, during which the bank was heavily impacted by a difficult political and macroeconomic environment affecting impairments. Despite these challenges, the bank remained profitable achieving an average ROAE of 14%. The bank has grown organically to position itself as the most profitable bank in Tanzania with a core civil servant client base and a strong brand presence in its market. Over the past three years, notable performance trends include increasing return indicators (ROAA and ROAE), an improvement in cost control, and stronger asset quality.

NMB achieved record growth and profitability in 2021, with a net profit of TZS 290 bn increasing by 41% year on year. This was the third consecutive year of strong growth. NMB’s progress is attributed largely to its infrastructure, digital focus, successful agency banking model, skilled management team, and good cost control.

Current Financial Performance

NMB performed well in 2022 achieving a net profit of TZS 429bn, an increase of 48% year on year. The robust growth in PAT was driven by the bank’s impressive revenue growth, and lower impairment provisions. Net fees and commission income increased by 31% year on year mainly attributed to higher transaction volumes in Agency Banking, Mobile Banking (NMB Mkononi), Card Business and FX income. The combined effect was an ROE of 28%, up from 23% in 2021.

The total assets of the bank increased to TZS 10.3tn from TZS 8.7tn in 2021. NMB has maintained its strong performance momentum for four consecutive years with a leading position in the market. This reflects the bank’s mature core business, operating model, client base, and the successful execution of its strategy.

Development Impact

NMB’s strategy supports the provision of financial services to unbanked and underbanked communities in Tanzania. The bank has a strong conviction in continuing to grow its business while fulfilling broader development goals, including financial inclusion, poverty alleviation, and economic development. The bank assigns 1% of its audited profit after tax as a contribution towards addressing in support of its socio-economic impact initiatives, which, over the past ten years, amounts to more than TZS 12bn.

The NMB Foundation expands upon its CSI agenda through a focus on five key pillars, including education (80 000 youth reached out through financial capability sessions, with 85 000 desks and
1 390 computers donated), health (600 health facilities received medical supplies and equipment), food and agriculture (1.4 million farmers supported through Agri programs, 400000 farmers benefited through capacity-building programs), environment (supported initiative to plant 10 000 trees to help restore biodiversity), and entrepreneurship (8 000 businesses trained via business clubs).

Further to the above, NMB, via its banking operations, has contributed toward developmental objectives in the following areas (2022 statistics):

Financial inclusion – The bank has 5.5 million mass retail customers, of which 2.9 million are in rural areas. 65% of NMB branches (228 in total) and 56% of NMB agents (19 854 in total) are in rural areas. The mass market sector was assisted with TZS 4tn loans in 2022, and TZS 3.7tn deposits were held for this sector.

SME/MSME development – NMB has 226 000 clients in this category, to whom TZS 1tn loans were disbursed, and deposits of TZS 704bn held for clients in this sector.

Female inclusion – NMB has approximately 888 000 female customers, supported through TZS 1.3tn in loans, with TZS 1.4tn deposits held.

Food & agriculture value chain – NMB serves more than 121 868 Agric-related clients (5 500 corporate clients and 115 340 MSMEs), disbursing TZS 498.4bn in loans to businesses and individuals within this sector.

Healthcare – NMB’s support of the Tanzanian health sector is informed by its view that the communities it serves as a bank will be stronger when members of the communities are healthier. To this end, NMB has provisioned hospital beds, delivery beds, and child and mother neonatal kits for healthcare facilities across Tanzania. Further to its healthcare agenda, NMB plays a pivotal role in the recovery of areas struck by natural (earthquakes, floods, etc.) and man-made disasters; it provides both material and moral support for victims of such disasters.

Refer to the following link for further insight relating to the developmental impact of NMB – https://foundation.nmbbank.co.tz/impact