United Bank declared a 13pc growth in profits, amounting to 381.7 million Br, during the recently ended fiscal year even though its shareholders' return declined.
The Bank, which commands around six percent of the banking industry's profit, announced last year's financial performance during a general assembly held at Hilton Addis Hotel two weeks ago in the presence of its shareholders.
The mood was interactive than its former general assemblies as the Bank's earnings per share (EPS) dropped to 27.1 Br from 32.4 Br.
"The profit performance of United is commendable. The news of lower EPS must be disappointing to its shareholders," said Abdulmenan Mohammed, a financial expert with 15 years of experiences.
The EPS of United is in a spiral of decline since 2011. The current EPS is half of what it was in 2011.
"The decline must have been due to a massive increase in paid-up capital unaccompanied by parallel growth in profit," Abdulmenan added.
The paid-up capital of the Bank increased by around 250 million Br to 1.5 billion Br last fiscal year.
For Taye Dibekulu, however, this is not concerning at all.
"It is a short-term problem caused by a surge in paid-up capital," he said. "Had it been without the growth in capital and increase in some shareholders, we could have registered EPS above 400 Br."
United has done well in generating income.
Interest on loans, advances and investment in National Bank of Ethiopia (NBE) bonds has increased by 26pc to 1.5 billion Br, while commissions and service charges have also gone up by eight percent to 332.61 million Br.
But, gains on foreign exchange dealings have declined by 12pc to 104.35 million Br. It is primarily due to a forex crunch the country has faced and the intense competition in this area of business.
The slow growth in export earnings is also one of the reasons for the shortage of foreign currency. For the past three years, export earnings of the country were stagnant at around three billion dollars.
Similar to United, other banks also reported a decline in gains from foreign exchange. In the past fiscal year, the fore earnings of Lion Bank halved to 50 million Br, whereas Bunna International Bank's income from forex remained stagnant.
During the general assembly, the issue of promotion was amongst the points raised by the shareholders for the drop in forex.
"We are not doing well in promoting the Bank. Unlike other banks we don't collect remittance through lotteries or gifts," said a shareholder of the Bank, who was dissatisfied with the forex gains of the Bank. "Much attention should be given to such mechanisms to fetch foreign currency."
Despite the claim of the shareholders, United spent 6.2 million Br to promote its services in the past fiscal year.
Moderate income collection has been accompanied by a soar in expenses for the bank.
Interest paid to depositors increased by 20pc to 634.78 million Br, general administration expenditures shot up by 10.75pc to 325.14 million Br, and salaries and benefits have risen by 32pc to over half a billion Birr.
Taye relates the surge in expenses to the aggressive branch expansion of the Bank in the past fiscal year.
"One of our priorities in the past year was expanding our branch," he said.
The Bank, having over 205 branches now, has opened 37 additional offices in the past fiscal year.
Moreover, United has provided 37.4 million Br for doubtful loans and advances, an increase of 38pc. Even though the total provision for these is reasonable for the current year, United should scrutinise it carefully, according to Abdulmenan.
Looking at its loan book, United has disbursed loans and advances of 12 billion Br, an increase of 41pc, whereas the total deposits mobilised by United have increased by 30pc to 17.6 billion Br.
"This is an impressive increase although it is similar to the industry's growth rate," Abdulmenan remarked.
Hence, United's loan to deposits ratio has grown to 67pc from 62pc.
"This is a good performance. It may have been due to a slowdown in investment in NBE's five-year bonds," said Abdulmenan.
United has invested close to five billion Birr in NBE's five-year bonds. The investment in bonds accounts for 22.08pc of the total assets and 27.35pc of the total deposits of the bank. This ration, according to analysts, will remain similar for years to come as a huge chunk of NBE bonds will be due for redemption every year.