Abay Bank S.C. has repeated its commendable performance of the past four years under the leadership of its outgoing female president,Mesenbet Shenkute, by what is claimed to be strength of management. However, there was an issue raised during its annual shareholder meeting on November 1, 2015 at Hilton Addis Hotel, over the report’s failure to attribute the bank’s success to Mesenbet. She had been at the helm until her resignation in late August,
2015 after clearing last year’s performance on June 30, 2015. Her name and photograph were omitted by neglect or oversight as a way of granting attribution for the bank’s achievements. Rather, the report referred to the new management, reformed after Mesenbet’s departure, and the president who replaced her, as if they had been active for the whole year. A source close to the case told Fortune that the omission actually caused disappointment among some shareholders during the bank’s annual meeting. Mesenbet, however, said she feels proud over what she achieved during her term in office, “we have make the bank successful”, she remarked. The report shows that Abay has enjoyed a profit bonanza, increasing its profit after tax by 118pc reaching to a little over 125 million Br. Despite the odds this increase has been reflected in warming up the pockets of no less than 3,700 shareholders, who saw their earnings per share sprint from 17.43 Br to 27.18 Br. This performance has mainly been driven by an increased in interest and non-interest income by 74pc to 285 million Br- bagged from interest based loans; much higher growth in comparison to the industry’s average which is 30pc growth. This was the main area attributed to the increase in profit. Mesnebet confirmed that Abay has aggressively worked in providing loans. Speaking of the other sources of profit, Abay has also registered a 59pc increase in non-interest income mainly generated from foreign transactions, service charges, and commissions to 213 million Br. The industry’s average growth is 27pc. Considered separately, the gain from foreign exchange transactions was minimal, covering only seven per cent of the non-interest income. Despite the limited number of customers involved in the export business, and generally, the competition in the sector for foreign currency in the context of weakening performance in foreign trade, it was not satisfactory, Tadesse Kassa, chairman of the
Board told Fortune. “Because of forex crunch we have struggled to work with importers in providing them hard currency,” he said, adding that this year the bank is working on expanding its forex generating mechanisms. This surge in income was not limited to the bank’s income though. Its expenses in loans have increased by 69.3pc to 107.8 million Br, salaries and benefits have also jumped by
51pc to 99.5 million Br and not only those; general administration expenses have gone up by 37pc to 111.8 million Br. Its provision for doubtful loans and advances increased by 48.2pc to 11 million Br. The rise in general administration expenses was partly attributed to its branch expansion to 91 after the addition of 19 new branches. Parallel to the industry’s average in income schemes, growth in expenses is also higherinterest expenses, salaries and benefits and general administration expenses are 28pc, 39.5pc and 46pc, respectively. The bank has also leased land in Bahir Dar at a cost of 20 million Br to build an office. Tadesse saw the future ahead for the bank in expanding its capital base via the sale of shares, as it aspires to reach the two billion Birr paid up capital as directed by the National Bank of Ethiopia. For the current and coming fiscal years, the bank plans to raise to one billion Birr and is preparing a strategy to implement this plan. With capital totalling 550 million Br, the bank has already attained one billion Birr in subscribed capital, said Yehuala Gessesse, president. Total assets have also registered an increase to 4.5 billion Br, which enabled the bank to invest 1.04 billion Br in NBE’s five-year bond. Abay’s investment in the central bank represents 23pc of the total assets and 29pc of the total deposits of the bank. Similarly, loans and advances have jumped to 2.31 billion birr by 57pc and its deposits have increased by 44pc to 3.6 billion Br, helping it to improve its loan to deposit ratio to 64pc from 59pc. This, while the industry average in 2014 was 57pc, explained Abdulmena Mohammed, a financial analyst working as an account manager for Portobello Group Ltd. based in London. He attribute the increase to aggressive expansion of branches which Tadesse said Abay will continue. Abdulmena appreciated the management of the bank for what he called “remarkable” improvement. In dealing with new directives issued by the national bank regarding corporate governance, the Chairman of the Board said he appreciates the initiative that prevents domination by influential shareholders and allows non-influential shareholders to have a say. “The directive has no practical implication for us as we have only two influential shareholders, who are members of the Board of Directors.” Mesenbet recommended that the bank continue the work culture of the management which she claim was more engaged, united and creative in its daily task. President Yehuala affirmed that Abay will continue the good practices of the bank under the former president, and will also strengthen itself with technologies to facilitate its electronic transactions.
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