Nib International Bank S.C. (NIB) received a highest offer of over 400pc above its par value of 500 Br during the first round of its auction of shares returned by foreign nationals of Ethiopian origin. However, the Bank has yet to announce the results of its first round of share auctions, even though the auction took place two weeks ago.
The winners of the offers of the auction have still not been notified of their award, nor have the results been posted. They are still being clarified, as there were still some bidders who have not presented proof of Ethiopian citizenship, according to sources from the Bank.
The Bank’s management is now looking into the bids given during the auction before announcing a date for subsequent rounds.
Nib Bank managed to sell one third of its shares during the first round of auctioning, although there are more shares coming in from shareholders. The dates of the following auctions have not yet been announced.
“It is a respected institution,” said Kibru Fondja, president of the Bank. “The Bank shows sustained growth from year to year, and its various investments, such as the new headquarters that is under construction, make it an attractive investment.”
The Bank has reported a six percent rise in profits to 357 million Br last year. However, it still experienced slower growth than other players in the industry, although it is now remedying the situation. In the same period, the Bank’s average earning per 1,000 Br share (EPS) fell to 129 Br from 137 Br a year ago. It has been declining since 2012 even though profits showed a modest increase during the same time.
“The offer shows that NIB’s share is overvalued,” says Abdulmenan Mohammed Hamza, an analyst at London Portobello. “While NIB’S fresh shares are on sale to the public at a maximum premium of 40pc, offering such a price at auction is meaningless.”
Currently, the paid up capital of Nib is over 1.5 billion Br, which is the fourth highest in the banking industry.
According to the banking business proclamation which was released eight years ago, foreign nationals or organizations fully or partially owned by foreign nationals are not allowed to own shares in Ethiopian banks.
The trend of inflated prices for shares is not a new one. Starting with Awash International Bank (AIB), prospective buyers have been offering prices as high as 26 times the par value for shares in their chosen banks. However, the reasons vary from bank to bank.
“Some people could be using it to get their foot in the door at a bank that may not sell shares regularly,” says a financial expert with decades of experience in the industry. “They may also have other motivations.”
The shares were returned in line with a November 2016 directive issued by the National Bank of Ethiopia, which directed the return of any bank share certificates owned by people with foreign citizenship. The premiums on the bank shares, the money over the par value of the shares, will go to the national treasury. AIB, Berhan Bank and Zemen Bank are among the institutions that have already completed auctions of their shares.
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