International Commercial Bank reels under heavy losses

DAR ES SALAAM: INTERNATIONAL Commercial Bank Tanzania (ICB) has made substantial loss in the year ending June as it reels under mounting operational costs and plummeting revenues.

According to financial statement released last week, the bank reported a staggering loss of 3.13bn/- at the year ending of June, a dramatic fall from the 870m/- profit recorded just a year earlier.

Net interest income fell to 1.2bn/- from 1.6bn/-, reflecting a severe squeeze on its core revenue streams.

Coupled with a decline in foreign exchange gains and non-interest earnings, the bank’s financial woes have deepened, casting a long shadow over its performance.

The financial statement reveals a series of challenges that have impacted the bank’s profitability.

Net interest income fell to 1.2bn/-, down from 1.6bn/- a year earlier.

The reduction in interest income, combined with a slight decrease in interest expenses to 788m/- from 906m/-, suggests a tightening squeeze on traditional banking margins.

Compounding these issues, non-interest earnings dropped significantly, plummeting to 1.4bn/- from 3.2bn/- in the previous fiscal year.

Notably, foreign exchange gains dwindled to 2m/-, a dramatic decline from 33m/-, reflecting less favorable trading conditions.

ALSO READ: TIB Bank rebounds with 5.6bn/- profit in Q2

Operational costs also presented a growing challenge.

Non-interest expenses rose to 3.4bn/-, up from 3.2bn/-, with salaries and benefits increasing by 10 per cent to 1.1bn/-.

The increase in operational expenses outpaced revenue growth, placing further pressure on the bank’s financial stability.

The bank’s income tax expense also saw a notable rise to 31m/-, compared to 15m/- the previous year.

This increase, while indicative of rising taxable income, comes amidst a backdrop of overall financial loss, complicating the bank’s fiscal outlook.

One of the few bright spots in the report was a 6 per cent increase in customer deposits, which reached 33.7bn/- from 31.7bn/-.

This growth in deposit base reflects continued confidence from customers despite the bank’s broader financial difficulties.

However, the bank’s asset quality is a growing concern.

The ratio of NonPerforming Loans (NPLs) to gross loans climbed to 30.4 per cent in June, up from 29.9 per cent the previous year.

This figure significantly exceeds the Central Bank’s benchmark of 5 per cent, underscoring a serious issue with loan defaults and credit risk management.

Financial ratios paint a challenging picture as well.

The return on average total assets (ROAA) turned negative, falling to negative 10.24 per cent from a positive 1.24 per cent last year.

The non-interest expense to gross income ratio surged to 96.58 per cent, highlighting that nearly all of the bank’s gross income is being absorbed by noninterest costs.

Additionally, net interest income as a per centage of average earning assets fell to 6.96 per cent, down from 7.99 per cent, reflecting reduced efficiency in asset utilisation.

A financial analyst Leonard Mwanga said the bank needs to reassess its operational strategies and cost management practices.