Enat Breaks Trend of High Flying Shares

The Bank has commenced share sales in a bid to prevent decreases in EPS

Enat Bank S.C’s expansion of its shares to increase its paid up capital has meant that the Bank’s other share sales fetched slightly underwhelming results.

The Bank floated 11,142 shares with a par value of 1,000 Br.

A total of 15 people registered for an auction of shares returned by foreign nationals, although only four people participated in the bidding. The Bank saw the highest offer of 50pc, although the bidding was attended by four bidders. The leftover shares will be floated again for a second round of auctioning, the date has yet to be decided.

It was not the only break with recent trends for the Bank. It also held an auction of shares this week in order to fulfil a tax debt owed by a shareholder. However, it was forced to cancel the sale after no bidders were present for the auction.

“The shares are already on the market and available for purchase,” explains Wondwossien Teshome, president of Enat. “There was not much urgency for the people who want to buy.”

The open selling of shares is part of the Bank’s plan to increase paid-up capital to the required half billion Birr without lowering the Bank’s earnings per share. The Firm’s performance last year showed a 50pc increase in net profits to 78.9 million Br, which helped Enat to boost its earnings per share (EPS) to the 167.6 Br mark from 164.3 Br the previous year.

Last year Enat’s paid up capital expanded to 565 million Br from 383.8 million Br.

“We have to expand our paid up capital in line with National Bank guidelines,” explains Wondwossien. “However, we do not want to drastically decrease earnings per share like other banks do.”

Banks have been holding auctions to sell shares returned by foreign nationals of Ethiopian origin, in accordance with a November 2016 directive issued by the National Bank of Ethiopia. Banks, such as Bank of Abyssinia, have been receiving bids as high as 26 times their par values.

Established in 2013 with 11 Board members, six of whom are high-profile women, the Bank, has recently surpassed a paid up capital of 700 million Br as of March, 2017. It is targeting reaching 800 million Br by the end of the current fiscal year.

The capitalisation requirements set out for the financial industry by the National Bank of Ethiopia, as well as the expansion of the Commercial Bank of Ethiopia (CBE) and increased regulation has resulted in increased competition amongst the banks, according to experts.

“Intense competition, escalating running costs and high capitalization has become the defining characteristics of the private banking sector. The effects of such phenomena on returns of banks have been in full swing since recently,” wrote Abdulmenan Mohammed Hamza, an analyst at London Portobello, in a commentary for Fortune.

In October 2016, Enat signed a new portfolio Risk Sharing Loan agreement with The United States Agency for International Development (USAID) and the Swedish International Development Cooperation Agency (SIDA).

The agreement provides 10 million dollars of collateral to enable Enat to cover losses on loans to women entrepreneurs, with a rationale of providing more loans to women-owned businesses and increasing its capacity to lend to small and medium-sized enterprises (SMEs).


Published on Apr 01,2017 [ Vol 17 ,No 882]



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