A 30% ROE Bank Trading at 6x Earnings

CRDB Bank delivered a strong Q3 2025 performance with profit after tax of TZS 506.1 billion (9-month cumulative), representing a 27% YoY growth. At the current market price of TZS 1,170 per share, the stock appears moderately valued with a P/E ratio of 15.73 and solid fundamentals supporting continued growth.

1. FINANCIAL PERFORMANCE ANALYSIS

Profitability Metrics (Bank Only - 9 Months 2025 vs 2024)

Income Statement Highlights:

• Net Interest Income: TZS 917.97B (+23% YoY from TZS 749.08B)
• Non-Interest Income: TZS 492.63B (+28% YoY from TZS 384.18B)
• Operating Income: TZS 728.24B (+28% YoY from TZS 567.98B)
• Profit After Tax: TZS 506.13B (+26% YoY from TZS 400.44B)

Key Performance Indicators:

• Return on Average Assets (ROAA): 5.5% (stable vs 5.5% in 2024)
• Return on Average Equity (ROAE): 29.7% (up from 29.1%)
• Cost-to-Income Ratio: 41.2% (improved from 44.35%)
• Net Interest Margin: 8.2% (slightly down from 8.4%)

✅ Positive: Strong profit growth, excellent ROE, and improving efficiency ratio demonstrate robust operational performance.

2. BALANCE SHEET STRENGTH

Asset Quality & Growth (Bank - As of Sept 30, 2025)

Total Assets: TZS 18.82 trillion (+1.3% QoQ, +28% YoY estimated) Loan Portfolio: TZS 12.01 trillion (+2.3% QoQ)

• Gross Loans to Deposits: 96.9% (healthy lending activity)
• NPL Ratio: 3.34% (up from 3.1% previous quarter)
• NPL Coverage Ratio: 43.3% (TZS 178.1B provisions vs TZS 411.5B NPLs)

⚠️ Watch Area: NPL ratio increased from 3.1% to 3.34%, though still within manageable levels. The coverage ratio of 43.3% suggests adequate provisioning but below the ideal 50%+ threshold.

Customer Deposits: TZS 12.39 trillion (-1.2% QoQ but +37% YoY)

• Slight quarterly decline likely due to seasonal factors
• Strong annual growth indicates growing customer confidence

Capital Adequacy:

• Shareholders' Funds to Total Assets: 12.9% (up from 12.2%)
• Total Equity: TZS 2.43 trillion (+7.3% QoQ)

✅ Positive: Well-capitalized with improving capital ratios, providing cushion for growth and potential stress.

3. REVENUE COMPOSITION ANALYSIS

Interest Income (9M 2025)

• Total Interest Income: TZS 1,284.67B (+24% YoY)
• Interest Expense: TZS 366.70B (+27% YoY)
• Net Interest Income: TZS 917.97B (+23% YoY)

Concern: Interest expenses growing faster than interest income (27% vs 24%), compressing margins slightly from 8.4% to 8.2%.

Non-Interest Income (9M 2025)

• Fees & Commissions: TZS 379.12B (+21% YoY) - 77% of non-interest income
• FX Trading: TZS 78.75B (+78% YoY) - 16% of non-interest income
• Dividend Income: TZS 13.75B (substantial increase from TZS 11.13B)
• Other Operating Income: TZS 21.01B (+27% YoY)

✅ Positive: Diversified revenue streams with strong growth in fee-based income, which is typically more stable and less capital-intensive.

4. COST MANAGEMENT & EFFICIENCY

Operating Expenses (9M 2025)

• Total Non-Interest Expenses: TZS 581.32B (+16% YoY)
  • Salaries & Benefits: TZS 290.92B (+15% YoY) - 50% of costs
  • Fees & Commissions: TZS 59.36B (+38% YoY) - 10% of costs
  • Other Operating Expenses: TZS 231.05B (+12% YoY) - 40% of costs

Impairment Losses: TZS 101.04B (+61% YoY from TZS 62.71B)

⚠️ Concern: Significant increase in impairment charges (61% YoY) reflects deteriorating asset quality and aggressive provisioning. This is the fastest-growing expense category.

✅ Positive: Cost-to-income ratio improved to 41.2% from 44.35%, indicating better operational leverage despite higher provisioning.

5. CASH FLOW ANALYSIS (9M 2025)

Operating Cash Flow: TZS 377.74B (positive, vs TZS 323.14B in 2024) Investing Cash Flow: -TZS 115.25B (primarily intangibles: TZS 84.35B) Financing Cash Flow: TZS 81.51B (net borrowings: TZS 247.12B, dividends: TZS 165.62B)

Net Cash Position: TZS 2.96 trillion (strong liquidity)

✅ Positive: Strong operating cash generation and healthy liquidity position support dividend payments and growth investments.

6. VALUATION METRICS

Current Market Valuation

Market Price: TZS 1,170 per share Total Shares Outstanding: 2,611,838,584 Market Capitalization: TZS 3.06 trillion

Key Valuation Ratios

Annualized EPS:

• 9M 2025 EPS: TZS 194 (TTM estimate: ~TZS 258)
• P/E Ratio: 4.53 (9M) or 6.05 (TTM estimate)

Wait - Let me recalculate this properly:

• Current quarterly EPS (Q3): TZS 63
• Annualized from Q3 rate: TZS 63 × 4 = TZS 252
• P/E Ratio: 1,170 ÷ 194 = 6.03 (using 9M actual)

Book Value Per Share:

• Shareholders' Funds: TZS 2.43 trillion
• BVPS: TZS 2,428,406M ÷ 2,611.84M shares = TZS 929
• P/B Ratio: 1,170 ÷ 929 = 1.26x

Dividend Yield:

• FY 2024 Dividend: TZS 165.62B total paid
• Per Share (estimated): ~TZS 63.40
• Dividend Yield: 5.4%

Return on Equity: 29.7% (exceptional)

7. STRENGTHS & OPPORTUNITIES

Key Strengths ✅

1. Exceptional Profitability: 27% profit growth with 29.7% ROE
2. Strong Capital Position: 12.9% equity-to-assets ratio provides growth cushion
3. Improving Efficiency: Cost-to-income ratio of 41.2% among best in sector
4. Diversified Revenue: 38% from fee-based income reduces interest rate sensitivity
5. Solid Liquidity: TZS 2.96T cash position supports operations
6. Branch Network Expansion: 254 branches (+1.6% YoY), enhancing reach
7. Attractive Valuation: P/E of ~6x and P/B of 1.26x suggest undervaluation
8. Consistent Dividend Payer: ~5.4% yield attractive for income investors