Tanzania's Banks Grew 24.5% in 2025. Their Profit Grew Only 2.5%.

DAR ES SALAAM — Two consecutive EY Parthenon reports on Tanzania's banking sector tell a story that doesn't show up in either one's headline numbers alone. Read together, they describe a sector that grew faster in 2025 than at almost any point in the preceding five years, and generated barely any additional profit for the trouble. The Growth Numbers Look Great in Isolation Total sector assets reached TZS 77.4 trillion by the end of 2025, up 24.5% from TZS 62.1 trillion in 2024, itself up 14.8% from TZS 54.1 trillion in 2023. Customer deposits followed the same acceleration, rising 25.8% to TZS 51.7 trillion after 13.9% growth the year before. Loans, advances and overdrafts grew from TZS 37.0 trillion to TZS 45.5 trillion. By any conventional measure of scale, 2025 was the strongest year Tanzania's banking sector has posted in the period either report covers. Metric202320242025Total assets (TZS trillion)54.162.1 (+14.8%)77.4 (+24.5%)Customer deposits (TZS trillion)36.141.0 (+13.9%)51.7 (+25.8%)Profit after tax (TZS trillion)1.502.11 (+40.9%)2.17 (+2.5%)ROAE20.1%23.6%20.1%ROAA3.0%3.6%3.1%NIM7.9%8.2%7.7%NPL ratio4.4%3.2%3.0%Core capital to TRWA14.6%16.2%15.0%Liquid assets to customer deposits49.2%49.9%42.8%Source: EY Parthenon, Tanzania Banking Sub-Sector Report 2024 (published September 2025) and Tanzania Banking Sub-Sector Report 2025 (published August 2026). The Profit Line Tells the Real Story Profit after tax reached TZS 2.17 trillion in 2025, barely above 2024's TZS 2.11 trillion, a growth rate of just 2.5%. That is a dramatic deceleration from 2024's 40.9% profit growth, and it happened in the same year the balance sheet grew fastest. A sector that added TZS 15.3 trillion in assets in a single year converted almost none of that expansion into additional earnings. The profitability ratios confirm the pattern rather than complicate it. Return on average equity, which climbed from 20.1% in 2023 to 23.6% in 2024, fell straight back to 20.1% in 2025, a complete round trip in two years. Return on average assets followed the same arc: 3.0% to 3.6% to 3.1%. Net interest margin, the core measure of how much banks earn on their lending relative to their funding costs, fell to 7.7% in 2025, its lowest point across the entire five-year series both reports document, down from 8.2% in 2024 and even below 2023's 7.9%. Put simply: Tanzanian banks lent and gathered deposits more aggressively in 2025 than in any recent year, and earned less per shilling of assets doing it. Capital Buffers Thinned Just as the Balance Sheet Grew Fastest The timing compounds the concern. Core capital to total risk-weighted assets, the primary measure of a bank's ability to absorb losses, improved to 16.2% in 2024 on the back of capital injections from TADB, DCB and MHB, then fell to 15.0% in 2025. That decline arrived in the exact year the sector's total risk-weighted asset base grew fastest, meaning the cushion protecting depositors and creditors thinned precisely when the assets it needs to protect against expanded the most. Both reports note the ratio remains above regulatory minimums, and both raise, in nearly identical language, whether the sector is adequately capitalised to support the large-scale infrastructure and manufacturing lending the government's development agenda calls for. That question reads differently once the ratio has moved in the wrong direction for a second consecutive year of data. Liquidity moved the same way. Liquid assets to customer deposits fell to 42.8% in 2025 from 49.9% in 2024, a notably sharper drop than anything in the prior three years of the series, even as liquid assets to total assets held essentially flat at 34.4%. Deposits grew faster than the liquid buffer held against them. Asset Quality Is the One Genuine Improvement, With a Caveat Not every trend points the same direction. The non-performing loan ratio fell to 3.0% in 2025, continuing an unbroken five-year improvement from 6.7% in 2021, and the lowest figure recorded in either report. Large banks posted the strongest asset quality at 2.6%, essentially unchanged from 2.8% the year before. The caveat sits with development finance banks, TADB and TIB Development, which both reports track as a distinct, small segment. Their NPL ratio stood at 10.9% in 2024 (then reported under the label "NBFIs") and 10.8% in 2025 (relabelled "DFBs" in the newer report, same two institutions). Both reports flag this explicitly as a segment requiring re-evaluation of credit quality and lending practices. Two years of essentially unchanged double-digit impairment in the same small segment suggests the issue has not moved despite being flagged in successive reports. The development finance banks segment also produced the most volatile numbers anywhere in either report: negative 17.4% ROAA and negative 50.8% ROAE in 2025, a reversal severe enough to distort sector-wide employee productivity figures, which fell from TZS 166 million per employee in 2024 to TZS 62 million in 2025 even as total sector profit barely moved, a gap large enough, given that employee headcount grew only 10.5% over the same period, that it likely reflects concentrated losses at a small number of institutions rather than a broad productivity collapse across the sector. Where the Real Change Happened: Capital Markets The most significant structural shift between the two reports isn't in the ratios at all. It's in what the sector did to fund itself. The 2024 report's capital markets highlights amounted to two items: NMB cross-listing its Jamii Bond on the Luxembourg and London exchanges in April 2024, and CRDB launching its insurance subsidiary in June 2024. The 2025 report's equivalent section is considerably busier: Azania Bank's Bondi Yangu bond in January (12.5% coupon), Zanzibar's first Sukuk tranche in May (10.5% coupon, aimed explicitly at financial inclusion and national development financing), new CMSA regulations for corporate and subnational bonds in May, record treasury bond bids exceeding TZS 1.2 trillion in August, and in the fourth quarter alone, CRDB exploring green and Al Barakah sukuk instruments, Tanzania Commercial Bank launching its 13.5%-coupon Stawi Bond, and NMB issuing a second social bond tranche at 12%. That volume of activity, several of it explicitly Islamic-finance structured, was essentially absent from the prior year's report. It suggests banks and quasi-sovereign issuers moved harder into market-based funding in 2025 precisely as balance sheet growth accelerated, a plausible, if not explicitly stated, connection: faster loan and deposit growth requires funding, and bond issuance is one channel for raising it without diluting existing capital ratios further. The M&A Wave That Wasn't Repeated 2024 was an active year for consolidation: Selcom Paytech's acquisition of a majority stake in Access Microfinance Bank, Access Bank Group's acquisition of BancABC Tanzania, the merger of two co-operative banks into the Co-operative Bank of Tanzania, and Canara Bank Tanzania transferring its assets to Exim Bank. The 2025 report's equivalent timeline drops the "Mergers, Acquisitions & Market Entry" category entirely, replaced by regulatory developments (a Fintech Regulatory Sandbox launched in January, its second cohort in September) and the capital markets activity described above. Whether that reflects a genuine pause in consolidation or simply a quieter year for headline deals, the market concentration the mergers produced hasn't reversed: large banks held 88.6% of total assets in 2024 and 89.0% in 2025, with CRDB and NMB alone accounting for roughly 47.5% combined in 2024 and a similar 49.6% in 2025. What to Watch in Next Year's Report Two questions carry directly into whatever EY's next edition shows. First, whether 2025's profit slowdown was a one-year margin compression event, plausible given the Bank of Tanzania's July 2025 rate cut from 6.0% to 5.75%, which would mechanically compress lending margins even as loan volumes grew, or the start of a more structural pattern of banks chasing balance sheet growth at the expense of returns. Second, whether the capital adequacy decline continues into 2026 or reverses, given both reports' shared, unresolved question about whether the sector's capital base can actually support the large-scale infrastructure and manufacturing lending Tanzania's broader development strategy is counting on it to deliver. FAQ Did Tanzania's banking sector actually get healthier in 2025? It's mixed. Asset quality genuinely improved, with the NPL ratio falling to its lowest level in five years, and the sector grew faster than at any point in the two reports' combined coverage. But profitability, capital adequacy and liquidity all moved in the wrong direction, meaning the sector's expansion in 2025 came without a matching improvement in how efficiently or safely that growth was financed. Why did profit growth collapse from 40.9% to 2.5% in a single year? Neither report states a single cause directly, but the data points to margin compression: net interest margin fell to its lowest point in the five-year series even as loan volumes grew substantially, consistent with the Bank of Tanzania's July 2025 rate cut narrowing the spread between lending and funding costs across a much larger loan book. Is Tanzania's banking sector adequately capitalised? Both the 2024 and 2025 reports raise this question without answering it definitively. Core capital to risk-weighted assets fell to 15.0% in 2025 from 16.2% in 2024, still above regulatory minimums, but moving in the opposite direction from what a rapidly growing balance sheet would ideally require. Which banks dominate the sector? Large banks held 89.0% of total assets in 2025, with CRDB and NMB alone accounting for roughly 49.6% combined, essentially unchanged from 88.6% and 47.5% respectively in 2024, despite an active year of bank mergers and acquisitions in 2024. What changed most between the two reports? Capital markets activity. The 2024 report recorded two capital markets milestones for the entire year; the 2025 report documents at least seven distinct bond and sukuk issuances across the year, including Tanzania's first quasi-sovereign Sukuk and its first dual-currency Sukuk, indicating banks and issuers turned more heavily to market-based funding in 2025. What is the ongoing problem the reports keep flagging but don't show improving? Development finance banks' asset quality. Both reports single out this two-institution segment (TADB and TIB Development) for an NPL ratio above 10%, essentially unchanged between the two years, alongside sharply negative profitability ratios in 2025, making it the one area where two consecutive reports' warnings haven't been followed by measurable improvement.