Tanzania Postal Bank is one of the old and largest banks in terms of market share in the banking industry in Tanzania. According to Daima Associates, an investment advisors and consultancy firm, TPB is ranked the seventh largest out of 43 registered
commercial banks in Tanzania. MNAKU MBANI spoke to its Chief Executive Officer (CEO) Sabasaba Moshingi on the bank’s current market position and the future outlook accepts.
Q: Tanzania Postal Bank is one of the oldest and largest in terms of market share. What are the major strengths that keep TPB in top of the list?
A: TBP is one of the oldest bank in Tanzania. It was found in 1925 and became operational in 1927 as Tanganyika Posts Office Savings Bank (TPOSB). Following financial sector reform in late 1980s, Tanzania Postal Bank (TPB) was established as successor of TPOSB. TPB was established by the Act of Parliament N0. 11 of 1991 as amended in 1992 and became operational as an independent institution in 1992 from the defunct Tanzania Posts and Telecommunication Corporation (TP & TC). Currently, the bank has a total of 28 fully fledged branches, 5 agencies and 115 Tanzania Postal Corporation agencies spread across Tanzania.
We are a bank for the common man (Truly Tanzania Bank for Middle and Small Income groups)the population segment which is still untapped with the growing banking and financial services in Tanzania. Our major clients who comprise more than 90% of our customer base are those with small incomes making small savings from their petty business or other economic activities.
We would like to be one of the top bank in Tanzania as we were here before most of other banks. Our intention is to reach there and we believe we have the potential. The history is what places us where we are now.
Q: Could you tell us how the bank has been performing over recent years?
A: The bank’s performance in terms of growth has performed well. Total assets increased from TZS 86 billion in 2008 to TZS 131 billion as at September 2011 being a growth of 52%. Customer deposits increased from TZS 79.6 billion in 2008 to TZS 116 billion at the end of September 2011 being an increase of TZS 36.4 billion or 46%. On the other hand shareholders’ funds more than doubled increasing from TZS 5.4 billion in 2008 to TZS 11.3 billion. Profitability trend during the recent years also increased, for example in 2010 we recorded a profit after tax amounting to Tsh465 million. We are projecting to achieve a record profit after tax since inception of Tsh2 billion this year. It has been a steady kind of profitable trend.
We are focused on making Tanzania Postal Bank efficient, profitable, and innovative also a market leader in our chosen market segment. The foundation built over years will help us in our transformation process over the years to come.
Q: Tell us what are the major drivers of the bank’s performances?
A: TPB has a number of products that drive the bank’s performances. The major driver is customers. We currently have about 600,000 loyal customers who have supported us in making deposits to our bank and in turn have enabled us to invest these funds in income generating investments like loans and advances as well as investment in government securities.
The bank has continually been improving its branches as well as opening new ones in order to capture a large segment of our market. Our mission has been to respond to customer needs so that they continue to feel proud by being TPB customers. The speed of services also has been key especially after acquiring an integrated banking software which not only enabled our bank to offer branchless banking but also service quality improved with customers being able to transact in any of our branches.
We also make sure that in order to improve our performance; we put our emphasis on the management of Non Performing Loans. This is a major challenge to us and the banking sub-sector in general. According to Bank of Tanzania the rate of NPL in Tanzania is close to 9 per cent. We are doing our best to recover our 2 per cent NPL.
Our biggest borrowers are government salaried employees and we have a good arrangement with their employers to make sure that they remit deductions on time.
The management costs and operations management costs are other major strengths that keep TPB on top of the list. We have a good control on operational losses.
We believe that the diversified nature of our customer base was an advantage to us. We do not depend on one kind of customers such as large depositors as this pose risk in bank operations. Once a single large customer decides to withdrawal money from his account and sometimes without notice then it can cause liquidity problems but our customers are those with small balances and they are free to transact without notice anywhere and anytime.
Our partner in business, Tanzania Posts Corporation has with it its wider network which provides extensive outreach beyond district level. Customers who look for convenience, flexibility, speed and quality of services will always come to TPB.
The bank has invested in training during the recent past to enable staff to acquire the necessary knowledge and skills to improve their service delivery. Training is done in-house and also short courses and seminars abroad.
TPB joined Umoja Switch, a network of more than 20 banks with a network of 115 Automated Teller Machines (ATMs) scattered across the country. A customer from these member banks can make withdrawals in these Umoja Switch ATMs wherever they are and these add to the flexibility of our service.
TPB is a member of World Savings Banks Institute (WSBI) which comprises of more than 100 members from 80 countries across the World. Through this association, TPB has benefited a lot including an on-going project branded TPB POPOTE which means customers using their mobile phones can access bank services wherever they are.
They can use their mobile phones to pay bills or top up air time and many more services to come. During the coming year, the bank will be recruiting more agents to offer banking services using mobile phones and Point of Sale terminals (POS).
Q: Banking industry is growing in Tanzania with increased competition between local and foreign banks, large and small. Do you feel threatened?
A: Despite the increased competition, we still see huge untapped potentials especially the unbanked and common people. Currently people with bank account are around 11% of total adult population this clearly shows that the untapped market is still huge. Mind you most of these new banks are not ready to go to rural areas where majority of low income Tanzanians leave. I believe that competition makes you think outside the box to improve in order to compete. We see competition as an opportunity rather than a threat.
My intention is to grow this bank and make it efficient, competitive and innovative. My focus is how I can do better.
Q: The first half of the year has already passed and some banks said it was not good as they expected. How has TPB performed during the period?
A: The first half of the year was not bad for us as it was business as usual. We recorded very strong positive trend on deposits growth, customer growth, loans and a very significant growth of our profitability.
If you look at our accounts result during the period in question you will see that our profitability grew by 3 times from Tsh465 million to Tsh1.4 billion. We always know who we are targeting and I can assure you that we did very well during the period.
Q: What was the performance of the bank during the third quarter of 2011 ended in September
A: The performance of the bank during the third quarter of this year was brilliant. The deposits grew to Tsh116 billion from Tsh112 billion recorded during the second quarter ended in June.
However, loans and advances shrunk slightly to Tsh62.7 billion from Tsh63.5 billion recorded during the second quarter. This was done in order to comply with Bank of Tanzania requirements.
The investment in government securities also went up to Tsh50.1 billion in Q3 of this year from Tsh45.5 billion.
All in all the after tax profit increased by 50 per cent to Tsh2.1 billion during the third quarter of this year, higher than Tsh1.4 billion recorded during the second quarter ended in June this year.
Other positive indicators include the return on average total assets which grew by 0.51 per cent, Return on shareholders’ funds was 6.19 per cent while non-interest expenses to gross income was 76.12 per cent.
Loans were the major drivers of our performance because we believe that lending to people will create growth. Through this experience, we will continue to post impressive performance.
Q: What are the business prospects for 2011 and 2012?
A: We have bullish plans for this year and the next in order to get good results. On year-to-year, our performance has grown for at least four times of our profitability. We expect to do better this year because we are currently 167 per cent ahead of our post-tax profit targets.
We have ambitious plans to establish a fully fledged treasury unit that will support our operations as well as contribute significantly to our top line.
Our focus in 2012 is to consolidate our bank. We have plans to reorganize the bank structure, bring new people, and introduce performance management as well as performance based reward. Similarly we are planning to renovate our branches to give them the nice look, grow customer base, and increase loans and advances.
Through all these consolidations, we are targeting to post a very good profit next year amounting to Tsh3 billion.
We are expecting to plough the 2011 profit to consolidate our operations and we have negotiated with our shareholders (the government) to inject much needed additional capital.
We have capabilities, we are everywhere. This is the bank for Tanzanians and we call it truly Tanzanian bank. We have recently introduced a mobile banking product known as TPB POPOTE and we will soon establish points of sale (POS) to enable our customers to withdraw or deposit anytime and anywhere they may be.
We are also strengthening our saving account product known as WADU, as well as making sure that our operations tariffs are lower and among the best in the market.