Addis International Bank (AdIB) reveals a 7.81 million Br profit, after tax, in its first operational year, 2011/12.
Buna International Bank (BIB) was the first of the private banks to declare a profit, of 48,000 Br, in its first operational year, in 2009/10. Since then, no other bank has recorded profits within the first year.
The major driving forces behind AdIB's remarkable performance are decent income figures, earned from both channelling funds between lenders and borrowers indirectly, and non-interest bearing activities. There was also a considerable decrease in expenses, according to Hailu Alemu, president of the Bank, who spoke at the Bank's general assembly, held atKokebBuilding, on December 15, 2012.
AdIB has banked 12.14 million Br from interest income. It has also earned 23.48 million Br from non-interest income. Out of this amount, 17.11 million Br represents commissions and service charges.
"This incredible result was recorded because of two reasons, which are integrity-based service and cost controlling mechanisms," said Hailu.
On the other side, AdIB has incurred 4.96 million Br on interest and 19.8 million Br for staff wages and general administration. It has also maintained a provision for doubtful loans and advances, amounting to 1.57 millionBr.This represents 12.9pc of interest income.
Even if it is common to put aside a large figure for the provision of doubtful loans, in the first year of operation, this is considerably higher when compared with other banks. .
"The Bank has to be careful in its credit screening process in the years to come to keep provision for doubtful loans under five percent," recommends, Abdulmena Hamza, accounts manager at theLondonbased Portobello Group.
AdIB has disbursed loans and advances of 152.9 million Br, and mobilised deposits of 211.4 million Br. Interest paying time and saving deposits represents 74pc of the total deposits, a normal figure for a young bank.
Its loan to deposits ratio stands at 72pc, which is considerably higher than the industry average.
"Thanks to our esteemed customers, the Bank has almost collected all the subscribed capital and is at the verge of selling new shares to meet the minimum capital requirement," said Hailemelekot Teklegiorgis, the chairman of the board of directors, in a congratulatory tone, at the Bank's general assembly.
"The management of the Bank should be appreciated for this achievement," said Abdulmena.
It has assets of 427.7 million Br, and has invested 40.2 million Br into the National Bank ofEthiopia's (NBE) five-year bonds. This investment represents 9.5pc of total assets and 18.9pc of the total deposits of the Bank.
Liquidity ratios indicate that the Bank is highly liquid. Its liquid asset to totals ratio is 37.4pc, and its liquid assets to total liabilities is 60.5pc.
The Bank has paid up capital of 147.41 million Br and capital adequacy ratio of 102.7pc. This shows that the Bank is highly capitalised. In order to fulfil the NBE requirements, however, which compels private banks to secure a paid up capital of 500 million Br by 2016, the Bank needs to increase its capital by 36pc.
After setting aside the legal reserve from its net profit, for the financial year 2011/12, the Board of Directors recommended, to the general meeting of the shareholders, that 5.5 million Br be paid as a dividend. At the same time, they requested that shareholders use said dividend to acquire more shares, thereby boosting the capital base of the Bank.
"The Bank expects the existing shareholders and the general public to respond positively to its call to buy the floated shares and fulfil minimum capital requirements within the given time," Hailu told shareholders.
The shareholders have decided to increase their capital up to 350 million Br, until the 2014 fiscal year, and reach 800 million Br, in 2016, according to Hailu.
Shareholders decided to invest 100pc of their dividend income, from this financial year, as working capital.
"Increasing capital requires a considerable amount of hard work," advises Abdulmena.