16 December 2012

Ethiopia: Berhan Bank Shareholders Forego Dividends

On the occasion that the shareholders decided to invest their dividend in to the bank's capital in order to fulfill the requirement of National Bank, Belachew Bogale, president of the bank explains the importance to the shareholders.

For the second year running, Berhan Bank shareholders have decided to forego their dividends for the purpose of building the Bank's capital, in a bid to meet central bank requirements.

The decision was made at their annual board meeting, held at the Global Hotel, on Saturday, December 1, 2012.

"This shows that the shareholders have confidence in the Bank," said Belachew Bogale, president of the Bank.

Berhan has increased its paid up capital by 46.4pc to 197.14 million Br, which still maintains it as the lowest in the industry. It does, however, have a sound capital adequacy ratio of 42.71pc.

The Bank needs to build its capital by 26pc annually, in order for it to meet the 500 million Br mark set by the National Bank of Ethiopia (NBE) for 2016, according to Abdulmena Mohammed Hamza, accounts manager at theLondonbased Portobello Group.

Berhan's net profit has grown to 34.1 million Br, a 60.8pc improvement on the previous year's performance. Its return on equities has slightly improved too, up to 16pc from 15.8pc, as the growth in capital and reserves has been lower than the growth in profit after tax.

"The commendable achievement of the Bank in such a challenging environment is the result of a collective effort exerted by shareholders, Board of Directors, bank management and employees," said Solomon Alemseged, the board's chairperson.

Interest income grew by 59.6pc to 57.8 million Br, and non-interest incomes grew by 55.5pc to 51.5 millionBr.

The shareholders asked the management during the assembly to increase the Bank's market share by opening more branches and promoting the Bank through various media outlets. The Bank currently has 19 branches.

"I really like the way the Bank communicates with its customers," said Solomon Kifle, a share holder, referring to the SMS mobile communication the Bank uses to inform customers whenever there is activity on their accounts.

The Bank also launched Internet banking services on a pilot basis this year, according to the report presented to shareholders.

"This has helped us to serve our customers easily," Belachew told shareholders at the meeting.

Berhan Bank has disbursed loans and advances of 493.7 million Br, an increase of 50.5pc and mobilized deposits of 931.7 million Br, an increase of 34.2pc.

Demand deposits have also improved to 80.7pc from 185.3 million Br, which Abdulmena says, is a sure sign of improvement.

Even though the loan to deposits ratio of Berhan is lower than the industry average, it has increased from 47.3pc to 53pc.

Total expenses have gone up by 48.7pc to 62.8 million Br; interest expense has increased by 59.6pc to reach 28.2 million Br, and staff and general expenses have gone up by 46.8pc to 34.6 millionBr.

Berhan's investment in NBE bonds has reached 181.6 million Br, representing 14.13pc of their total assets, or 19.5pc of the total deposits of the Bank.

Unlike other private banks, the liquid assets of the Bank have slightly increased in absolute terms. Its cash and bank balances have gone up by 1.7pc to 538 million Br, whilst the liquid assets to total assets ratio stands at 41.9pc, and the liquid assets to deposits ratio has gone down to 57.8pc from 76.2pc.

Even if the various liquidity ratios have declined in comparison to last year, they are considerably higher than other private banks, which according to Abdulmena, should give Berhan ample opportunity to expand its loan book in the coming year.

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