30 December 2012

Ethiopia: Cooperative Bank of Oromia Reaps Double Profit Rewards

Cooperative Bank of Oromia (CBO) increased its profits by 112pc, to 102 million Br, in the last fiscal year, due to doubling their profit after tax, whilst simultaneously increasing paid up capital by 58.7pc, to 280.6 million Br.

This performance was announced at the annual shareholders meeting, held at Adama town,OromiaRegionalState, on October 22, 2012.

The Bank's earnings per share (EPS) have also increased by 55.2pc, to 45 Br, in which the Bank declared a dividend payment of 33.6 Br a share.

The performance indicates that the Bank is among the top performers in the industry, based on EPS. The average EPS recorded in the industry, during the 2010/11 fiscal year, was just 37.3Br.

"We have put every possible effort in to maximise our market share and it has showed by our performance in terms of EPS," says Wondimagegnehu Negera, president of the Bank.

The major reasons for this performance is the increase of total income by 58pc, to 343.98 million Br, whilst total expenses increased by only 32.4 pc, to 164.2 million Br.

The financial statement of the bank reveals that all areas of the Bank have performed extremely well.

Interest earned on loans and advances has soared by 82.2pc, to 172 million Br, and non interest income has also increased by 35.5pc, to 131.9 million Br.

From non-interest income items, commission has more than doubled, and now stands at 87.5 millionBr.The gains on foreign exchange dealings, however, have dropped by 23.6pc, to 42.2 million Br.The decline in foreign exchange dealing income has been an industry wide phenomenon.

CBO has incurred 59.2 million Br on interest, an increase of 37 pc, and 104.97 million on staff and general administration expenses, which is an increase of 29.6 pc. In relation to the increase in total income, the increase in total expenses is modest.

"This is an indication of good expense management and the management of the Bank should be applauded," appreciates Abdulmena Mohammed Hamza, accounts manager at the London-based Portobello Group.

The Bank has disbursed loan and advances of 1.4 billion Br, nearly twice that of the previous year, and mobilised deposits of 2.8 billion Br.Its loan to deposits ratio stands at 48.7 pc, which is well below the industry average, as well as the recommended 70 pc.

"A lot of hard work is needed to reverse this unsatisfactory performance," Abdulmena suggests.

The total assets of the Bank have increased by 49 pc, to 3.7 billion Br, and its total liabilities reached 3.3 billion Br. CBO has invested 426.9 million Br in the National Bank of Ethiopia's (NBE) five year bonds. The investment represents 11.6 pc of the total assets and 15.3 pc of the total deposits of the Bank.

"Though painful in the short run, it is worth the sacrifice for the good future to come," says Wondimagegnehu.

Liquid assets have declined in absolute and relative terms. Cash and balances have gone down by 10.8pc, to 1.086 billion Br. Liquidity ratios indicate that the Bank is a liquid bank even if a decline in liquidity level is observed. Its liquid assets ratio is 29.6pc and its liquid assets to total liabilities are 33.4pc.

CBO has increased its paid up capital by 58.7pc, to 280 million Br, and it has a capital adequacy ratio of 24.8pc. This shows that CBO is a well capitalised bank. In order to fulfill the NBE requirement that compels private banks to have a paid up capital of 500 million Br, by 2016, CBO needs to increase its capital by 17pc.

"Considering the current capital growth, CBO can comfortably achieve this target," assures Abdulmena.

The Bank currently has 70 branches and is planning to build its headquarters this year, on the 5,000sqm land it has received from the Addis Abeba City Administration.

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