We Expect Profit to Rise By 20 Percent This Year – Commerce Bank

The Citizen (Dar es Salaam)

2 May 2011

Dar Es Salaam — The National Bank of Commerce (NBC), a subsidiary of South Africa’s Absa expects profit to increase as much as 20 per cent in 2011 as it recovers from a tripling in bad debts last year when it adopted new reporting standards.NBC’s net income plunged to Sh2.2 billion in the 12 months through December, from Sh40.8 billion a year earlier, according to the bank’s financial statement, which has also been posted on its website.

Impairment losses on loans and advances surged to Sh38.3 billion from Sh13.8 billion.”The drop in profit in 2010 was mainly due to a significant impairment charge on loans and advances, and a higher cost of operation in quarter one,” NBC managing director, Mr Lawrence Mafuru told Bloomberg in a phone interview from Dar es Salaam.

“We now expect to return to normal performance and increase profitability by 15 to 20 per cent.” Absa owns 55 per cent of NBC, which is planning an initial public offering that would make it the fifth bank to trade on the Dar es Salaam Stock Exchange. Tanzania’s government plans to sell 20 per cent of the lender, while Absa and the World Bank’s International Finance Corporation will sell 2.5 per cent each.

Last year, NBC adopted a new “group impairment model” and aligned the company with the central bank’s financial reporting standards, said Mafuru, who was appointed as managing director in June last year.

“Over the past three to four years, we were very aggressive in expanding our credit portfolio, and in such a market you always face challenges of defaulters.So we got to the stage where we had to be realistic.”

NBC also installed a $20m banking system in the first quarter of 2010 that required a change in its automatic teller machine technology, according to Mafuru.That contributed to a 35 per cent increase in costs for the year, he said.

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