Commercial banks portfolio holdings behaviour: does size and ownership matter? Evidence from Tanzania

Abstract

This study examines the portfolio behaviour of commercial banks in Tanzania by using panel financial data of 14 banks from 1998 to 2010 on a quarterly basis, making 52 quarters and 728 observations. The sampled banks had more than 85% of the total commercial banks assets on average in the time of the study. The study objectives were to analyze the portfolio behaviours of commercial banks in Tanzania with respect to the size of a bank and ownership. Financial statements data was collected from quarterly mandatory publication of the bank data for the individual banks, and were analysed based on an ordinary least squares model. Findings revealed that banks do hold their portfolios with very little differentiation amongst themselves, which indicates that there is little or same innovation patterns. Assets allocation is more with loan products and investments in government securities. Large banks and foreign banks enjoy returns from the interbank lending due to their relatively large capital and assets base. The study calls for innovation, organizational learning and specialization of banks, and more oversights on a foreign bank entry as well as for large banks.

Keywords: commercial banks, portfolio behaviour, foreign banks, bank size, bank ownership