Ethiopia: Addis Bank Registers Huge Profits
Posted on :Friday , 3rd February 2017
Addis International Bank has had an impressive year, registering an annual profit growth of 100pc, since its establishment in 2011 as one of the late entrants into the banking industry. The Bank earned a net profit of 85.3 million Br in the 2015/16 fiscal year, a 46pc increase over its performance in the previous year.
The Bank currently claims to have over 8,370 shareholders with over 532,580 shares.
The Bank's major shareholders include Ethiopian Airlines employees' Saving & Credit Cooperatives, Addis Abeba Saving & Credit Cooperatives Union, the Ethiopian Roads Authority Employees' Saving and Credit Cooperative, the ethio Telecom Employees' Saving & credit cooperative and Yirgachefe coffee farmers cooperative union.
In 2016, the Bank declared earnings per 1,000 Br shares (EPS) of 193 Br; 3.2pc higher than the preceding fiscal year.
"The earnings would have been higher if the Bank focused on short-term gains," a shareholder at Addis told Fortune.
Addis's EPS is two times lower than the highest earnings per share held by Dashen Bank.
"The EPS growth is encouraging despite a massive increase in paid-up capital," says Abdulmenan Mohammed Hamza, an analyst at London Portobello Ltd.
Last year, the Bank passed the half billion Birr minimum capital requirement set by the National Bank of Ethiopia (NBE).
Its paid up capital soared by 41pc to 516 million Br, which is the second lowest in the private banking industry. The Bank has achieved this status in five years after its establishment. While Debub Global Bank is the only Bank that has not met the requirement so far.
Enat Bank, Addis' nearest competitor, which was established a year after Addis, has a paid up capital of 565.1 million Br. Enat registered 79 million Br in net profit last year, eight percent lower than that of Addis. The private banking industry amassed net profits of 4.4 billion Br last year. Addis's share in these profits was below two percent. Its market share was almost the same as the preceding year.
However, Hailemelekot Teklegiorgis, board chairman of Addis, sees the Bank's performance as worthy of applause despite stagnant market share. In spite of challenges such as shortage of foreign currency, skyrocketing office rent, severe competition in deposit mobilization and the pressure to meet the minimum capital requirement, Addis achieved remarkable performances, according to Hailemelekot.
Addis, which held its 5th annual meeting a month ago, reported notable growth in its major spheres of business.
As observed in the industry, over half of Addis's income comes from interest on loans and investment in NBE bond. Last year, it reached close to 150 million Br.
The Bank's income from foreign exchange dealings surged by 30pc to 25 million Br, which is three times higher than the amount gained by Addis's peer, Enat. Last year, the private banking industry collected 1.8 billion Br from foreign exchange; Addis had a 1.3pc share of this.
The total income of the Bank has reached 295 million Br during the recently ended fiscal year, with a growth rate of 42pc. The same growth rate also observed in the Bank's total expense, reaching over 182 million Br. Interest paid on deposits has increased by 52pc to over 63 million Br.
Operating costs such as general administration expense and salary and benefits rose by 37pc to over 114 million Br, of these the Bank spent 47.4 million Br for salary and benefits.
"The increase in operating expense was largely due to the increase in rental expense of branch offices," said Hailu Alemu, founding President of the Bank.
In a bid to increase its market share, Addis opened nine branches last year, raising its branch network to 40 and represents 1.3pc of the industry branch total, which is nearly twice its nearest competitor Enat. The recruitment of additional manpower also contributed to the increase in operating expenses.
Last year, the Bank hired 126 people, bringing its total to 360 employees. Fifty-six employees left the company last year for different reasons.
"Most of them left seeking better salary and benefits," said Hailu.
As of September 2016, the Bank adjusted its salaries by an average of 40pc, with the aim of reducing staff turnover.
Currently, the private banking industry employs over 31,770 individuals and paid an aggregate of three billion Birr annually; one-fifth of the total industry's income.
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