As a getaway to escape devaluation by investing in collaterals, Nib International Bank has purchased a nine-storey building with a bid of 680 million Br after cut throat competition with three other banks. The property is owned by Kebede Tesera, who is a shareholder of Nib and is currently serving a 25-year prison sentence mainly for usury charges.
Awash Bank S.C., Bunna International Bank and the Bank of Abyssinia are the banks which competed with Nib to own the property.
The auction was held at the Federal Judgment Execution Directorate located at Sidist Kilo on June 30, 2017, with the initial price of 72.7 million Br. The Bank of Abyssinia was the forerunner with a 670 million Br offer.
This comes in the midst of the surging trend of Brick and Mortar banking in the country, which entails the total shift of focus of the banks from the technological expansion aspect of banking to construction and buildings, as banks are persistently taking up construction and expansion projects all over the country.
From the local banks, Dashen and Awash Bank have the largest number of buildings.
Nib Bank alone is currently undertaking three major construction projects around the country including the construction of a building at Senga Tera in Lideta District, which is aimed to ultimately become the headquarter of the Bank. Other constructions as well are underway including a 12-storey building in the town of Hawassa and a five-storey building in Dukem. Up until last year, the company’s fixed assets amounted to close to 400 million Br.
Such a surge of expansion and construction is a good move for the banks whose rent expense is high, so long as they are used as headquarters and offices, according to Abdulmenan Mohammed, an analyst at London Portobello Ltd.
“It will be protecting them from the surge of inflation, and will be only good if they made it without the intention of investment,” said Abdulmenan. “Because the cash could be more demanded as a loan than investment.”
The building that is newly acquired by Nib is located in Arada District next to Tourist Hotel, lying on a 2,926sqm plot of land. Currently, the Bank is headquartered at Dembele City Center in Bole District, paying 25 million Br in rent annually.
The newly acquired building needs some finishing works which can cost the bank 150 million Br, according to Kibru Fondja, president of Nib.
It will mainly be turned into a business centre that will be used for income generation, according to Kibru.
The Bank plans to move its headquarter to the new building upon completion of the finishing works in the coming six months. It will also serve as a transitional headquarter until the construction work on the Senga Tera building is completed.
Nib has also been involved in a legal dispute over the building with the Ethiopian Revenues & Customs Authority (ERCA) over the past six years. Nib won an entitlement of 55 million Br with interest adding up to 120 million Br. And for the purchase of the building, it will only pay about 560 million Br.
The legal battle started between Kebede and the prosecutors of ERCA eight years ago at Lideta Federal High Court 11th criminal bench. ERCA accused Kebede of charges including aggravated cases of usury, tax evasion, money laundering, illegal banking and presentation of false tax documentation.
Nib became a part of the case almost two years after it began. It claimed that it had an interest in one of Kebede’s properties, which was to be confiscated as the building was mortgaged. The Bank loaned Meketa Real Estate, which Kebede was its major shareholder, granting the building in April 2008.
However, the claim was counter parted by ERCA which argued that the Bank should not be entitled to the building, as the building was not constructed at all.
ERCA claimed that Kebede invested illegally earned money to purchase shares from Nib, and if the building was awarded to Nib, Kebede would benefit indirectly.
The issue was finally settled at the Federal Supreme Court Cassation Division in December 2016, ruling that Nib would take 120 million Br from the sale price of the building, citing the good faith of the Bank among other things.
The former owner of the building, Kebede, is in prison after being found guilty on all counts of a charge except for illegal banking.
Nib was established 18 years ago with a 27 million Br investment capital and currently has close to 4,000 shareholders. The Bank’s recent capital is about 2.2 billion Br, of which 1.7 billion Br is paid up capital.
“The issue of this building has been a major headache for most of our shareholders, so its acquisition will be a major relief and achievement for the Bank,” Kibru asserted.
Leave a Reply