Berhan Auction ends on 4,100 Br Strong Note

The Bank received a highest bid of 4000 Br

Berhan Bank has presented a solid showing during the latest S.C round of share auctions held by private banks, with a highest offer of 4,100 Br per share for a lot of two shares. The Bank carried out its auction of shares returned by foreign nationals of Ethiopian origin on March 6, 2017.

A total of 22,355 shares were presented for public subscription worth around 22 million Br at their par value, which is the highest amount of shares auctioned so far. The lowest bid given during the auction was for the par value of 1000 Br.

The highest bid was presented by Amdework Yeshitila, a 34 year old information technology specialist. This is his first time buying shares in a bank.

“I didn’t expect to have the highest offer,” says Amdework. “I was just trying to put in a competitive bid.”

Berhan’s highest bid continued the trend that banks have been seeing with smaller lots getting higher bids. The Bank’s highest bid was lower than the bids that were submitted during Awash International Bank’s share auction and higher than the bids submitted during Zemen Bank’s auction. The former got a record-high offer of 20,000 Br and the latter received an offer of 1,550 Br.

Amdework reasons that the Bank’s youth and strength are both attractive selling points.

“I like to support developing companies,” explained Amdework. “The Bank is growing well, but it is still small enough that people can buy small numbers of shares.”

The Bank’s management agrees with his assessment of the Bank’s strengths.

“The Bank has a strong year last year,” said a director at the Bank. “We paid a higher dividend than many banks. It makes us attractive to potential shareholders.”

“The high offers at Awash may have come because the Bank does not sell shares often. The bids they received seem as though people are trying to get their foot in the door.”

However, financial experts do not agree with the assessment of Berhan’s value.

“If we go by book value (taking into account last year’s massive increase in DPS), the premium for Berhan’s share should be between 20pc to 40pc. Acquiring shares of Berhan with par value of 1000 Br for 4,100 Br to earn average gross dividend per share of 179 Br, will result in an annual return of 4.36pc. The investor needs to wait 23 years to recoup the initial investment,” explains Abdulmenan Mohammed Hamza, an analyst with London Portobello.

The Bank had registered a remarkable result last year, with its net profits climbing to 260.2 million Br This was an increase of 146pc from last year’s performance for the seven-year-old. The growth rate of Berhan’s profit is the highest in the banking industry in 2016. The outstanding profit helped the Bank to increase its earnings per share (EPS) from 207 Br to 399 Br.

Up until June 2016, the paid up capital invested by Brehan’s 9,000 shareholders reached 731 million Br. Of this roughly three percent of the share was owned by foreign nationals of Ethiopian origin. Foreign nationals held below an estimated one percent share of the shares in the banking industry. The current paid up capital of the firm is 1.086 billion Br.

The auction of foreign national owned shares began after the introduction new directive by the regulatory body, Central Bank, three months ago. The directive states that the share certificates of such shareholders were to be returned, and the dividends claimed. The premiums on the shares, the value offered above par value, will be given to the national treasury. On average, shares of banks are worth 40pc more than their par values. the treasury will get about 65 million Br from the auction sales of the returned shares.

The directive comes seven years after the enactment of the banking business proclamation, which states that foreign nationals or organisations fully or partially owned by foreign nationals are not allowed to own shares in Ethiopian banks. It was issued in time for the banks’ presentation of their annual reports to their shareholders.


Published on Mar 11,2017 [ Vol 17 ,No 879]



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