Dar es Salaam. The glass is almost half empty for foreign exchange revenue among the banks in Tanzania, which are still uncertain about developments in 2020 amid the negative impact of the coronavirus pandemic.
An analysis of the first quarter financial statements from 10 first-tier banks, with assets of at least 100 trillion, indicated that foreign exchange earnings declined significantly during the first quarter (Q-1/2020).
This revenue stream (currency trading) had been the fastest growing in the last year.
The significant growth of the flow was evident last year as it started with the closure of agencies for change towards the end of 2018 and early 2019.
However, in one drastic event, all ten lenders reduced their total foreign exchange earnings from Sh64.68 billion in the first three months of 2019 to Sh37.15 billion by the end of the first quarter of 2020, according to their statements.
The banks analyzed were CRDB Bank, NMB Bank, National Bank of Commerce (NBC), Stanbic Bank, Standard Chartered, Absa, Diamond Trust Bank, Exim Bank, Azania Bank and Citi Bank.
In late 2018, the central bank began cracking down on agencies for change for what the regulator said most whistles procedural and other regulatory frameworks for the currency exchange business.
The government suspected questionable trades and money laundering through the private dealers and was closed.
The banks had since rushed to offer foreign exchange and tried to exploit the opportunity presented by the closure of the bureaus. Last year, the Bank of Tanzania introduced new guidelines for money trading centers, including a demand for capital of at least Sh1 billion – up from Sh300 million earlier.
The moves resulted in a decline in the number of dealers from 110 in May 2018 to just five in December 2019.
Banks say their first-quarter results were generally good, but fear their future may be impacted by the impact of coronavirus that had infected 509 people and killed 21. ”NMB Bank achieved excellent results in the first quarter of 2020 , with 13 percent growth in total operating income, “said NMB Bank Acting CEO Ruth Zaipuna.
However, she is concerned about future performance that may be adversely affected by the effects of coronavirus.
“In light of the ongoing Covid-19 pandemic, management anticipates increased impairment pressure on the loan book, and efforts are currently focused on customer relationships and recalibration of the 2020 strategy to minimize the expected impact,” she added.
Experts share similar feelings.
A Mzumbe University economist, Professor Honest Ngowi, said the decline in foreign exchange trading revenue coincided with the coronavirus outbreak, affecting travel and tourism, and also destroying imports and exports.
“I see banks register high rates on non-compliant loans (NPLs), as borrowers are influenced by Covid-19,” said Prof Ngowi.
Some borrowers will certainly ask for repayment of loan repayments, and profits will fall as well. I think 2020 will be a huge year for the banking sector, ”he added.
For Prof Delphin Rwegasira of the University of Dar es Salaam’s finance department, the banking sector’s results will mostly depend on the government’s policy of reviving the economy following the coronavirus pandemic.
“Some travel and tourism activities, employment and education have been depressed by Covid-19 and I think the government will come up with a recovery vision for the economy,” said Prof Rwegasira.
He also believes that Tanzania will secure support from the International Monetary Fund (IMF) to strengthen the recovery plan. “The results of the banks will therefore depend on the recovery policy to be adopted,” he added.