Status Quo Results at Dashen Bank


The latest report showed that the bank’s income grew at 9pc, a lower rate of increase than the 16pc growth in expenses.




Dashen bank has seen slight decline of profit by less than 1pc, while the ripple effect negatively affecting the earning of shareholders to 487 Br per 1,000 share, 17pc lower than previous year.

The decline is defended by the Asfaw Alemu, CEO of the Bank as a result of hike in operational costs.

Last year the operational cost of the bank 0reached close to 337 million Br while salaries and benefits take the lion share of the cost

The now bank has 220 branches nationally, 68 of which were opened this year.

“The unprecedented branch growth coupled with unfavourable market conditions led the bank’s gross profit to fall last year,” Asfaw said.

The National Bank of Ethiopia has ordered all the banks in the country to increase their existing branches by 25pc annually as part of second Growth and Transformation Plan.

The bank capital despite the fall on profit and earnings per share is on the rise, reaching 1.5 billion Br. It is expected by the Central bank to reach 2 billion Br in 2020.

“Unless the management focuses on increasing profit soon, there is high chance that it will further go down,” commented Abdulmena Mohammed Hamza, analyst at Portobello Ltd. “Increasing the capital of the bank should be done in line with the profit growth.”

The latest report showed that the bank’s income grew at 9pc to 1.2 billion Br. This is a lower rate of increase than the 16pc growth in expenses of 214.85 million Br. Interest income, National Bank of Ethiopia (NBE) bonds and other deposits surged by 10pc to 1.7 billion Br. Service charges, commissions and other incomes rose by 12pc or netted the bank a profit of 731.7 million Br last year.

The banks earning via foreign exchanges dropped by 4pc to 288 million Br as a result of competition within the industry and fluctuation in commodity prices in the international market. This is the second year in a row that the bank is reporting fluctuation in foreign exchange dealings.

Dashen’s expense growth has been highly disproportionate to the bank’s other earnings. Interest paid on deposits increased by 11pc to 741 million Br while general administration expenses have seen growth of 20pc to 444 million Br. Salaries and benefits of employees experienced a slow growth compared to last year. It increased by 14pc to 569 million Br.

The bank’s spending on bad loans soared by 118pc to 29 million Br. Abdulmena thinks such figures are reasonable for a large bank.”The bank should keep an eye on business areas that are costing the bank more than the benefit they bring in,” Abdulmena said.

The bank, which was established in 1994, currently has more than 1.4 million customers.

In 2015, the bank saw its two nominees for vice-presidents rejected for being under qualified. The same year, the bank lost two of its executives, Berhanu W. Sellasie, former president of the bank and its vice president for Resource & Facilities Management, Abebe Teklu.

It recently appointed a new Vice President for its department of marketing and business development bringing them to three. The bank has 5600 employees and controls 32pc of the private banking industry with Awash Bank, equally.

The total assets of the bank increased by 15pc to 28.6 billion Br in the past year. While loan disbursements and cash advances have grown by 10pc to 12.5 billion Br and mobilized a deposit of 22.8 billion Br, 15pc high comparing to 2014/15. Accordingly, the loan to deposit ratio of the bank has declined to 55pc from 57pc in 2014/15. The ratio saw a 2pc decline comparing to last year industry’s average. The drop indicates there is a high increase of deposit over the loan given to the bank’s customers.

“The management should look up ways to raise the bank’s loan disbursement,” Abdulmena suggested.” Since the bank is a well capitalised bank, it has the capability to raise the amount of loan and advances.”

Bank’s investment on NBE five years bonds surged by 11pc to 6.4 billion Br last year, representing 23pc and 25pc of the bank’s total assets and liabilities, respectively. These ratios have shown a slight decline comparing last year owing to the fact that the first batch of the investments has been due for redemption during the year ended 30 June 2016.

“These ratios will remain stagnant or fall in the coming years,” Abdulmena said.

The bank’s liquidity rates shows that the bank has improved its performance. Its cash and bank balances skyrocketed by 24pc to 6.8 billion Br while the percentage of liquid asset of the bank per the total asset reached 24pc from the previous year of 22.3pc and liquid asset per total liabilities increased to 26.6pc from 24.7pc a year before. This shows the bank is a more liquid state than the preceding fiscal year.

 



By Samson Berhane
Fortune Staff Writer

Published on Nov 01,2016 [ Vol 17 ,No 861]


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