Debub Global Bank continues to earn record profits as its earnings from operations accelerated by an average 75pc. The bank’s results were presented during the company’s fourth annual meeting, held at the Hilton Hotel.
Its profit after tax increased threefold to 51.6 million Br.
“The increase in EPS of Debub is very remarkable so the shareholders of the bank must be happy,” said Abdulmenan Mohammed Hamza, analyst at London Portobello.
During the recently ended fiscal year, the company implemented a five-year strategic plan in a bid to provide quality banking services and further consolidate its position in the industry.
Industry veterans such as Awash and Bank of Abyssinia implemented new strategies during the last fiscal year.
Debub was one of the late entrants into the banking industry as the 15th private bank. The bank reported a 14.3 million Br loss during its first year of operations.
Even though making a loss is commonplace for newcomers to the industry, the amount reported at Debub Global was larger than normal.
Since then, the company has reversed the trend and its profit has been growing by an average of 145pc per annum.
Enat Bank S.C. is the latest entrant into the industry when it made its debut three years ago.
In its latest annual report Enat declared a profit of 79 million Br, 53pc higher than Debub’s profit.
Besides a surge in profit, Debub’s earnings per 1,000 share (EPS) increased more than two times to 222 Br. The growth rate is the highest of all private banks.
Debub is the only bank which didn’t achieve the minimum paid up capital requirement set by the National Bank of Ethiopia six years ago.
As of June 30, 2016, the firm’s paid up capital bumped up by 32pc to 262 million Br. The bank will need to double its capital to reach the half billion birr mark by the next reporting period. With the exception of Enat and Debub, all banks were obliged to fulfill the requirement in 2014/15.
The two banks were given a five-year grace period since they were established later than the other banks.
Last year, Enat achieved the half billion birr target two years ahead of the deadline.
Debub has until August 2017 to fulfill the Central Bank’s requirements. In its latest shareholders meeting, shareholders decided to reinvest the profits earned during the last fiscal year. In addition, they also promised to double their shares in the bank during the current fiscal year.
Currently, the bank is selling shares to the public to raise its number of shareholders. It has more than 6,800 shareholders so far.
The Central Bank wants all private banks to have a paid up capital of two billion Birr in the coming three years.
Awash Bank S.C, with a paid up capital of 2.2 billion Br, is the only bank that hit that target so far.
Moreover, the growth in all income items has helped Debub to improve profit and EPS.
While most banks reported a mixed result in income, Debub came up with a hike in all income generating activities.
Interest on loans, advances and NBE bonds increased by 78.4pc to 84.2 million Br.
Net gains on foreign exchange dealings have gone up by 69pc to 13.2 million Br. This is almost twice the earning of Enat. This is a positive performance considering the forex crunch that hit the country last year, which saw its export earnings reduced by seven percent to 2.8 billion Br in 2015/16.
The same trend was also observed in commissions and service income, which increased by 60pc to 86 million Br and accounts for more than half of the total income.
Some experts in the industry claim that such a percentage share is risky to the bank, as it leaves it vulunerable to the economic environment.
“As long as the risk is manageable, it is one of services given by the bank,” said Addisu Habba, Debub’s president.
Salaries and benefits surged by 34pc to 42.6 million Br.The bank has created job opportunities for more than 470 individuals so far.
Debub is among the banks which was affected by the unexpected salary raise of some of the banks in the industry.
Bank of Abyssinia, Brehan Bank and Cooperative Bank of Oromia boosted their employees’ salaries.
“Despite the challenge, our staff turnover rate is moderate at around nine percent,” said Addisu.
Overall, the growth in income outstripped the growth in expenses. The latter grew by 75pc to 194 million Br while the former increased by 42pc to 126 million Br.
Besides the positive performance, a liquidity analysis shows that liquidity level of Debub has declined both in value terms and relative terms.
“Debub has operated under tight liquidity so it should take extra care from further reduction,” Abdulmenan warned.
“We used the idle money so the reduction is obvious,” Addis argues.
Its cash and deposit in other banks declined by 85pc to 152 million Br. While Its liquid assets to total assets ratio has declined by half to 15.2pc and liquid assets to total liabilities ratio has also decreased to 20.2pc from 35pc.
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