Abstract:
This study aimed at examining the profitability of commercial banks in Tanzania. Specifically the study aimed at determining the effects of bank specific characteristics (internal) on bank profitability, Examine the effects of macroeconomics factors on bank profitability, and eexamining profit persistence in Tanzania commercial banks. This study involved four main banks; CRDB Bank Plc, National Bank of Commerce, Exim Bank (T) Ltd and National Microfinance Bank in terms of profitability.
This study involves analyzing commercial banks operating in Tanzania for a period of 5 years from 2014 to 2018. In analyzing financial ratios including, capital adequacy, asset quality, quality of management, inflation, interest and liquidity. The study utilizes the information released in its annual reports and financial statements by the sample banks. Descriptive statistics were applied in analyzing the data.
The results showed that Return on assets (ROA) ranges from a high of 4% to a minimum of 0.5%. ROA has a 61% deviance from the mean as depicted by the standard deviation. It can be perceived that there was intermittent performance of banks in terms of ROA between 2014 and 2018, with the highest growth rate being recorded between 2014 and 2015. Also operating expenses ratio (OER) ranges from a high value of 86.8% to a low value of 53%. There is a 17% uncertainty in NPL value. The mean NPL is 55%. Inflation averaged 4.35 percent and declined significantly from around 14 percent in 2014 to its lowest of 3.8 percent in 2018. However, from 2016 inflation has been rising at a very fast rate and has been in double digits since 2017. NMB has maintained the highest CAR over the period of study followed by CRDB, EXIM and then NBC. The overall performance of the sample banks shows a good capital sufficiency. NBC has the best average LDR followed by NMB, EXIM and then CRDB which have an average LDR of 76.26%. CRDB in 2016 scored with LDR of 82.6%, this rating implies that there should be concerns in case the depositors where to pull out their deposits at the same time hypothetically. The banks all scored an average rating of “5” which implies management performance concerns. CRDB has the least average OER followed by NMB and then EXIM and NBC.
