Tanzania’s Tough Stance on Banks to Stoke Consolidation: Moody’s

DAR ES SALAAM (Capital Markets in Africa) – Central bank’s revocation of five lenders’s licenses and their subsequent liquidation last week signals willingness to let ailing banks fail, which will lead to industry consolidation and smaller number of larger, stronger banks, Moody’s Investors Service says in an emailed note.

Move will lead to struggling small banks merging with each other, being acquired by larger competitors or finding strategic shareholders

Contagion risks remain for smaller lenders over next few months as depositors and creditors of five banks under liquidation face payment delays, loss of some deposits

Larger institutions including CRDB Bank, NMB Bank unlikely to be affected as they report strong capital and profitability metrics and have strong domestic franchises that allow them to source cheap customer deposits; larger banks also likely to benefit from some government support due to systemic importance

NOTE: As of March 2017, 13 banks had inadequate capital levels, including 10 so-called community lenders; Bank of Tanzania instructed them to restore capital to required regulatory levels, with three including Kilimanjaro Co-operative Bank, Tanzania Women’s Bank and Tandahimba Community Bank given until June 30 to raise TZS2b or lose their permits.
NOTE: Tanzania has 41 commercial banks, six community banks, three development-finance institutions and five micro lenders
NOTE: Jan. 4, Tanzanian Central Bank Revokes Licenses of Five Lenders