Driving Growth and Managing Risks: A Look at Tanzania's Banking Sector Outlook with Stanbic Bank CEO

Now, we are joined live by CEO of Stanbic, Tanzania, Manzi Rwegasira, to gain insights into the bank's outlook on Tanzania's economic landscape, from managing capital flows to mitigating currency risks. The CEO shares their perspective on key issues shaping the banking sector at the moment. Welcome, Manzi. Thank you very much. So, Manzi, just looking very happy for you to be on our show today. If we just begin with the fact that the central bank rate has been fixed at 6 percent just in June, and at the same time growth projections for GDP are at 5.6 percent. What is your outlook for the banking sector for the coming months? That's a great question, and thank you for the opportunity again to speak on this forum. The banking sector has had a very good last couple of years. I think by most metrics the industry has continued to grow. Private sector credit growth has grown double digits. GDP growth has been positive. NPL ratios at the same time have been low and declining. Overall, the banking sector has been able to thrive. I think it's the renewed confidence that many corporations, investors, and just consumers have, and have been having the last few years that's really encouraged this extra credit growth that we're seeing. So, banks in the foreseeable future will continue to drive that growth. Interesting you say that the NPLs are declining. I actually saw a report on a marginal increment of 11 percent, reaching to 11-point-some percent. Do speak to that, because it was also given to the fact that there were external factors, overall economic slowdown leading to more and of course currency decline leading to more non-performing loans. So, despite this positive outlook that you paint, what external and domestic risks should one be looking out for in the banking sector, and specifically also at Stanbic? It's a great question again. Look, I think one of the things that we look at, of course, as mentioned before, is the NPL ratio and what's going to happen. So, if you go back several years ago, you can see that it's gone down quite considerably from the highs that we've known to a much more steady state. Of course, the NPL ratio, as one measure, it varies between banks and within the sector. You have banks that have very low ratios and a few that have quite high ratios. But by and large, the average and the median have been declining quite a lot. And I think that's a very positive signal and indicative of improving the economic environment. So, we're continuing to ride that wave and that growth. But as you pointed out, there are some potential risks, exogenous and potentially internally. Exogenous factors, which are oftentimes beyond the control of banks such as ours and many of our competitors, they could conclude some of the geopolitical risks that we're all familiar with. Continued tensions between Russia and Ukraine, potential flare-ups again in the Middle East. All those can have massive impacts on energy prices. We saw what happened in the last few years with energy prices since the outbreak of conflict in Russia and Ukraine. Another flaring up could create further pressure and challenges in terms of fuel prices and energy. So, those are things that we can't control and could impact our economy, therefore impact us as a bank. So, we look at those and we try to advise our clients accordingly to take precautions, maybe not to overextend themselves. And of course, look at how they manage currency risk because that's where it really hits them oftentimes. So Manzi, that would be the key question then. In this environment, you're seeing again the Tanzanian shilling declining slightly again. What measures is Stanbic putting in place to ensure that its assets are protected, customers are protected from all of this foreign translation currency loss that exists? So we try to take a prudent approach to managing currency risk. Because as you rightly pointed out, it's one of the big risks that clients face and banks face. We would, in this environment, always advise our clients to avoid a mismatch between your inflows and your outflows. So if you're earning local currency, it's best that you match that to any kind of leverage that you take on board. Although it might seem tempting and it might appear cheap to use a foreign currency, particularly initially. I mean, as the macroeconomic trends have shown and as a lot of historical evidence has shown, that can change quite quickly and you might find yourself overextended. So we would advise, continue to advise our clients to avoid those mismatches. Certainly us as a bank, when we look at transactions that come in front of us, we assess them from that perspective. What are the potential, not only credit risks, but what else were the potential FX risks that the client could face? And what does that mean for the bank? Right. And at the same time, alongside currency decline and interest rate actually quite, I would say, very stable and nominal in terms of looking at the region itself, East Africa. So 6 percent is not that bad at all. How has that impacted FDIs? There's been a net, as far as net flow is concerned, there is a mild decline there as well. So what are you at Stanbic doing to ensure that there is capital flow into the Tanzanian market? As well as, are you hedging? How are you against the risks that are either macroeconomic or currency related? So when we look across the region, first and foremost, we're a pan-African bank. We're part of larger center bank group. We have operations in East Africa and West Africa and Southern Africa. When we look across those different markets, we see East African region being a really key growth factor for us, given its growing economic might, relative stability and the integration between the different regions. And then within the East African region itself, look at Tanzania, we see, again, a stable political environment, an economy which has various export earning potential, whether it's minerals, tourism and so forth. So from that perspective, we see it as a really key investment destination. And we're starting to see that in the data. Look at the data and look where the flows are coming in from. A lot of it is flowing from Tanzania. And we see that continuing for the months and years ahead. Now, how do we protect our investors and ourselves from that? Again, we encourage investors to come in, we advise clients to avoid mismatches in terms of currency risks. We have products which we give out to our global markets teams on how they can hedge potential currency risks and mitigate those. And we see that as being one of the key differentiators that we have and other banks do not have, at least in the market. So from our perspective, Tanzania is a great investment destination, a lot of potential. Some things that need to be worked on and improved, but overall, a good place to put your money. For sure. There's always room for improvement. But at the same time, the Tanzanian government has been actually working towards certain structural reforms to empower the private sector flow into certain more up-and-coming and better-performing sectors. So looking at the good-fit rating, B-plus, stable outlook, very last comments from you, Manzi, about which sectors are most promising as a bank for you today? The recent upgrade, I think, spoke about the growth opportunity that the country has, particularly vis-Ã -vis regional peers and across the continent. And that's testament to the microeconomic stability that there is. Key areas for us that we see is the energy space infrastructure as well. Those are areas that we want to focus on, whether it be the ports, transportation. There's a lot of money being invested in those areas. Well, Manzi, we'll have to bring you back. Unfortunately, we're out of time. But we'll have to bring you back to break down from the sectoral sense where are banks taking interest and also foreign investors with all these changes that are on the horizon and currently happening. Thank you so much for joining us, Manzi, the CEO of Stanbig Bank Tanzania, talking about the banking landscape in Tanzania.

Manzi Rwegasira, CEO, Stanbic Bank Tanzania joins CNBC Africa to share insights into the bank's outlook on Tanzania's economic landscape. 

Stanbic Bank CEO on Tanzania's growth prospects, banking sector outlook

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Stanbic Bank CEO on Tanzania's growth prospects, banking sector outlook

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