Enat Bank S.C., one the last entrants to the Ethiopian banking industry, ended the 2014/15 fiscal year with an 84pc increase in its profit after tax to 53.1 million Br in its second year in business.
Its paid-up capital increased from 261.6 million Br the previous year to 383.8 million Br. In the midst of all this it reported an increase in its rate of earnings per share (EPS) from 13.47pc to 16.43pc; one share has par value of 1,000 Br.
Enat also reported total income of 198 million Br, a 110.6pc increase from the previous year’s performance. This growth was attributed mostly to an increase from interest income which skyrocketed by 200pc to 125.7 million Br and the gain from ForEx which doubled to 15.1 million Br. Its expenses also increased by 57pc to 69.7 million Br reflecting a difference that underscores Enat’s good standing.
Most of its expenses were from salaries, general operations & administration. Particularly, salaries and benefits doubled to 27 million Br, and the latter reached to 35.7 million Br from 25.3 million Br. In this regard staff numbers increased from 103 to 195. In addition, the Bank opened seven new branches as of June 30, 2015 bringing the total to 14. This branch expansion has helped Enat to mobilize total deposits of 1.7 billion Br, a 56pc raise from the 2013/2014 report.
This is not enough, however, to enable Enat to meet the central bank’s requirement for all banks to increase their branches by 25pc annually, with three quarters of them located outside Addis Abeba.
“This could be a pressure for all banks,” said a source close to the banking sector, “as it also is a time when most of them are engaged in technological expansion.” This will not be a big challenge for Enat though, as it has only few branches so far.
Enat’s interest expense also increased from 15.8 million Br to 63.2 million Br, but its loans-to-deposits ratio also improved from 50pc to 67pc. It means larger proportion of its deposits is disbursed as loans and advances.
“The increase in loans to deposits ratio is very impressive,” said Abdulemenan Mohammed Hamza, an analyst working as accounts manager at the Portobello Group Ltd.
Its cash-and-bank balances have increased by 17pc to 502.1 million Br, representing 22.8pc of the total assets and 28.4pc of the total liabilities
Enat has 17,314 savings account holders, of which 60pc are women. New depositors during the reporting year were 9,971, of which 5,981 are women. The bank has 10,584 shareholders. In 2015 it disbursed 1.3 million Br of loans to women borrowers without collateral, as part of its scheme to empower women. These loans have been made through special deposits made by other women and partner organisations to provide the collateral for female entrepreneurs who qualified for participation in the scheme. The system is supported by the United Nations Development Programme (UNDP) Entrepreneurship Development Centre.
Loans and advances grew by 634 million Br to 1.5 billion Br, with one billion Birr in loans. Most of its loans went to construction, import and export sectors in proportions of 26pc, 25pc and 20p, respectively. The Bank expanded its total assets to 2.2 billion Br, an increase of 55.8pc.
According to the statement in the report, the Bank, unlike the deadline set for other banks, has two more years to raise its paid-up capital to 500 million Br. Unlike other banks Enat is obliged to fulfil the minimum paid-up capital by the end of June 2018. NBE’s directive number 50/2011 stated that all existing banks shall raise their paid-up capital to half a billion by 2016.
Enat Bank was under establishment at the time that this directive was issued. Article 4, sub article 4.3 of the directive on minimum paid-up capital stated that banks under formation shall meet the minimum paid-up capital after five years from the commencement of banking operations.
It will be very difficult for the bank to reach two billion Br paid up capital in five years, said Abdulemenan. Increasing will cost shareholders so much in terms of lower earnings per share.
“It will never be easy on us,” said Wondwossen Teshome, president of the Bank. The bank will work to keep the pace of the EPS with that of the paid-up capital, he added. The Board is yet to decide on the capital growth for the current fiscal year.
Founding shareholder, Tigest Alemu, 40 shares, told Fortune she thought Enat’s performance impressive. “It was better than that of other banks,” she said. She earned close to 5,000 Br as a dividend last year.