Bunna International Bank S.C has earned a record seven year profit and earnings per share. This year, its profit after tax soared to 39.5pc to 187 million Br. However, the profit growth is half of what has been in the preceding year.
The earnings per share surged to 19.6pc to 343 Br for the seven-year-old private bank. That is slightly higher than the average in the private banking industry which is at 333 Br. This is three times higher than what it was in 2013.
This comes amidst of the resignation of the head of the bank, Eshetu Fantaye, who left because of health issues. The performance is welcome news to Tadesse Chinkel, a long-time Chief Operations Officer, now the acting CEO of the bank.
The bank has seen growth from various incomes including loans, advances and NBE bonds which increased by 59.3pc to 491 million Br. Its foreign exchanges also went up by 27.2pc to 48 million Br. This is a slightly below two percent of what was achieved by the industry in 2015.
Despite the many achievements of the bank in the last four years, it has stayed at the bottom of the industry in foreign exchange dealings. The share of foreign exchange dealing to its gross income has been declining and insignificant, averaging 9.7pc.
“This must be due to the declining trend of export earnings in the country,” a banking expert who wished to be unnamed observed.
Tadesse echoed this sentiment, “The falling of export earnings and remittance forced us to gain less amount of forex in the industry”.
Tibebu Eshetu, Chairman of the bank, acknowledged to Fortune this shortcomings of the bank. “We understood our strategy failed in this stance”.
Accordingly, the board ordered the management of the bank to come up with new strategies on improving its foreign exchange income by December of this year.
On the other hand, shareholders were complaining about the profit growth rate of the bank during the company’s recent shareholders meeting at Millennium Hall.
“The growth is very low in Comparison with peer banks like Brehan Bank,” a shareholder complained.
Two week ago, Brehan surprised its shareholders, announcing a profit of 260 million Br, a 149pc rise comparison with the preceding fiscal year. At the same time, it managed to raise its EPS by 102 Br to 399 Br.
In 2015, Bunna’s income was 29pc higher than Brehan Bank. However, in 2016 the latter earned 7pc more.
Overall, the growth in income has not been without costs. In 2015, Bunna spent 66 cents for every birr it earned, which is 10pc higher than the industry’s average. The figure was around 45 cents four years ago.
The banking industry has been hit hard, with an increase in its overall expense over income.
Last year, Debub Global Bank S.C. was the highest spender with 79 cents whereas the lowest spender was Cooperative Bank of Oromia with 55 cents of spending for every one birr of income.
Bunna’s general and administrative expense surged by 30pc to 144.4 million Br in 2016. The growth is 18pc lower than the preceding fiscal year.
Conversely, it recorded the highest provision for doubtful loan and advances. This amounts to 204pc to 35 million Br.
“The bank needs to install a system to avoid such loses happening again,” a banking expert reflected to Fortune. However, the bank seems optimistic about the rise of its provision. This is due to an increase in its loan portfolio, according to Tadesse.
During the just ended fiscal year, the bank disbursed loan and advances valued at 3.7 billion Br, which is 97.4pc higher than the preceding fiscal year.
Last year, Ethiopia’s banking industry saw an increase in provision for doubtful debts. It went up by 65pc to Birr 302 million. Of these, four percent of the total was provided by Bunna. Cooperative Bank of Oromia had the highest share at over 50pc.
During the recently ended fiscal year, the non-performing loan (NPL) of the Bunna was 3.5pc, well below the regulatory threshold of 5pc.
On the other hand, salaries and benefits increased by 50pc to 130 million Br, representing 69.5pc of profit after tax.
Earlier in this fiscal year, it made a salary adjustment for its bankers at an average rate of 30pc. The rationale of the raise was justified for issues such as staff retention, the bank noted. The salary adjustments did not include the executives of the bank.
The liquidity level of the bank shows a slight improvement from last year. It has gone up to 18.3pc from 17.8pc. In value terms, its cash and bank balance increased to 1.25 billion Br from 0.8 billion Br last year.
Over the past few years, the liquidity level of the industry has declined due to increased loan to deposit ratio and investment in the National Bank of Ethiopia’s five year bonds. Apart from this trend, the bank shows a slight improvement from last year. It has gone up to 18.3pc from 17.8pc. In value terms its cash and bank balance increased to 1.25 billion Br from 0.8 billion Br last year.
This is not, however, surprising as the first batch of NBE’s five year bond that was due for redemption in June 2016. This was a considerable amount of liquidity resources that was expected to be injected in the industry, on which liquidity level of most banks is expected to be improved.
A year before that, the decline in liquidity was a concern within the industry. The decline has been observed across all banks.
In 2015, the least liquidated bank was Awash, with a liquidity ratio of 16pc, whereas the most liquid bank was Berhan with a ratio of 30pc.
In the mean time, Bunna has not yet decided when or how it intends to find its next permanent CEO.
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