CRDB, NMB redefine banking competition dynamics

DAR ES SALAAM: FUNDING strategy and operating efficiency are emerging as the clearest dividing lines in the country’s banking sector, as first-quarter results from CRDB Bank Plc and NMB Bank Plc point to a shift in how performance is defined among leading lenders.

For years, the competitive narrative centred on balance sheet expansion, with asset growth and loan book size serving as the primary indicators of strength.

That model is now evolving. The latest disclosures suggest that, growth, while still important, is no longer sufficient on its own.

The focus is increasingly on how that growth is funded, how efficiently it is managed and how effectively it is translated into earnings.

Alpha Capital Executive Director Gerase Kamugisha said for years, the two banks, both listed on the Dar es Salaam Stock Exchange (DSE), have moved broadly in tandem, leveraging strong balance sheets and a growing economy to deliver consistent profitability.

“Yet recent developments, particularly in capital markets activity, point to a subtle but important divergence in strategy that could shape their performance in the years ahead,” Mr Kamugisha said.

At the centre of this divergence is the use of bond financing. Over the past three years, CRDB has emerged as the country’s most active bank issuer in the domestic capital markets.

Through a series of thematic and structured instruments, the bank has raised several hundred billion shillings in medium-term funding.

“These issuances have not only attracted strong investor demand but have also broadened CRDB’s access to long-tenure capital, aligning well with the financing needs of large projects and corporate clients,” he said.

“At first glance”, he said, this might suggest that CRDB is more reliant on capital markets funding than its peers.

But that conclusion would be misleading The bank’s balance sheet remains firmly anchored in customer deposits, particularly low-cost current and savings accounts (CASA).

Its bond issuances are better understood as a strategic overlay designed to diversify funding sources, extend maturities and tap into emerging pools of ESG and institutional capital rather than a substitute for its core deposit base.

“In other words, CRDB is using capital markets from a position of strength,” Mr Kamugisha said. NMB, by contrast, has been less visible in the bond market over the same period.

While it has undertaken selective issuances, including retail-oriented bonds, these have been relatively modest in scale and infrequent in nature.

“The bank continues to rely predominantly on its deposit base, which has historically been one of the strongest in the market,” Mr Kamugisha said.

However, he said, recent financial results indicate that this model is coming under increasing pressure. Funding costs have begun to rise more sharply, reflecting tighter liquidity conditions and intensifying competition for deposits.

In response, NMB has started to explore alternative funding channels, including wholesale instruments, but this shift remains at an early stage.

“This is where the apparent contradiction often arises,” he said “CRDB has issued more bonds in absolute terms, yet it appears less strained by funding costs.

NMB, despite issuing fewer bonds, is experiencing greater upward pressure on its cost of funds”.

He said CRDB’s larger and more diversified deposit base gives it flexibility. It can enter the bond market opportunistically, locking in funding when conditions are favourable and deploying it into longer-term assets.

This reduces its exposure to short-term liquidity fluctuations and helps stabilise margins. NMB, on the other hand, is beginning to tap non-deposit funding in response to rising marginal costs.

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While this is a logical evolution, it can initially lead to higher funding expenses, particularly if market conditions are not optimal.

“The result is a more immediate impact on profitability metrics, even if the strategy supports longer-term growth,” Mr Kamugisha said.

CRDB’s recent trajectory reflects a bank that has spent the past several years building scale and is now translating that strength into improved earnings performance.

CRDB’s Group Chief Executive Officer, Abdulmajid Nsekela, said the results are a product of deliberate choices in how the bank balances growth, risk and efficiency.

“We are no longer chasing leadership, we have achieved it,” he said, adding that growth has been supported by investment in productive sectors, digital platforms and disciplined risk management.

In the first quarter, profit after tax rose by 18.9 per cent to 206bn/-, supported by continued balance sheet expansion.

Total assets reached 23.9tri/-, deposits climbed to 16.3tri/- and loans and advances grew to 14.7tri/-.

CRDB asset quality also improved, with the non-performing loan ratio easing to 2.85 per cent, reinforcing the bank’s risk management stance. At the same time, cost discipline remains central to its operating model.

The cost-to-income ratio held at 41.6 per cent, enabling revenue growth to feed more directly into profitability. By contrast, NMB presents a different balance between growth and profitability.

Historically, the bank has been one of the sector’s strongest performers in terms of earnings, consistently translating its large deposit base into solid profit outcomes.

However, the latest results suggest that this advantage is being tested as operating conditions tighten. In the first quarter, NMB recorded total assets of 18tri/-, up 25 per cent year-on-year, while deposits rose by 31 per cent to 13tri/-.

Loans and advances increased by 22 per cent to 11tri/-, underscoring its continued role in financing households and small businesses.

Despite this expansion, profit before tax rose by only 5 per cent to 276bn/-, indicating a growing disconnect between balance sheet growth and earnings.

The figures point to rising funding costs and margin pressure, as well as a more cautious lending approach as the bank prioritises liquidity and asset quality.

Dr Hildebrand Shayo, an economist-cum-investment banker said for years, CRDB and NMB have led Tanzania’s banking industry, competing closely in profitability, deposits, lending, branch networks and market influence.

“The profitability patten indicates a major structural change in competitive banking, highlighting broader shifts in digital banking, risk management, regional growth, balance sheet resilience and Tanzania’s economic standing within the financial system,” Dr Shayo said.

As Tanzania’s banking sector matures, these factors are likely to define the next phase of competition.

The institutions that align funding strategy with operational efficiency and revenue diversification will be better positioned to manage risk, protect margins and deliver consistent returns in an increasingly complex financial landscape. Regional maritime digitalisation key to Africa’s trade future

The post CRDB, NMB redefine banking competition dynamics first appeared on Daily News.

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