United Bank S.C. has shown a profit of 339 million Br this year, 20pc higher than last fiscal year.
The bank’s growth rate is higher than the average rate of growth of medium banks, a category that includes Nib Bank, Bank of Abyssinia, Wegagen Bank and United itself.
The bank’s earning per 1,000 share also bounced to 324 Br, unlike the trend observed in the past four years.
However, it is still 63pc lower than the bank’s 2012 EPS, due to an increase in capitalization.
United’s President, Taye Dibekulu, argues that the figure is still reasonable, as it is the fourth highest in the industry.
The bank’s paid up capital saw a two fold increase over the past five years. Currently, the bank has 1.2 billion Br in capital, 800 million Br short of the two billion Br requirement set by the National Bank of Ethiopia (NBE). However, it is still 28pc higher than last year’s capital.
So far, Awash is the only bank which has fulfilled the NBEs requirement of capital. All banks must reach two billion birr in capital by 2020.
Established in late the 1990’s, United has 3,200 shareholders. Last year the Bank assigned its founding CEO, Zafu Eyesuswork Zafu, as its new board chairman. Zafu will chair the bank for the coming three years.
Zafu was the first CEO of United Insurance, sister company of United Bank, and held the position for 17 years.
Unlike the industry average, income and expense showed the same percentage of growth. The 25pc growth in income brought about a similar increase in expenses.
“Unlike past years we tried to monitor the growth in expenses,” explained Taye.
Prior to last year, the bank’s expenses had been outstripping the growth in its income.
The bank’s income statements indicates that over three quarters of its profit growth is attributable to a rise in interest income, which reached 1.2 billion Br from 948 million Br in 2014/15.
Forex gains rose 15.5pc to 118 million Br.
Over the past five years, the country has been hit by forex shortages. They hit a peak last year when export proceeds declined by seven percent to below three billion Br.
Therefore, as part of its strategy the bank added more partners to increase forex earnings.
Currently, the bank has 10 partners, including Citi Bank New York, Standard Chartered Bank and Citi Bank Dubai. Last year, United earned around seven percent of the industry’s forex dealings. United’s closest rival, Wegagen Bank, earned twice as much in forex.
However, the figure is still reasonable, according to a banking expert who spoke to Fortune.
Salaries and benefits, accounting for 57pc of the company’s expenses, increased by 26pc to nearly 400 million Br. It expended more than 93 million Br for office rent. The figure is expected to decline more as the headquarter the bank is building is completed.
A year ago the bank signed a 1.5 billion Br agreement with China Jiangsu International Economic-Technical Cooperation Corp (CJIETCC) to build its headquarters. The project is expected to be completed in three and a half years.
The bank disbursed loans and advances of 8.4 billion Br last year, up from 6.7 billion Br in 2014/15.
Deposits increased by 17pc to 13 billion Br in June 2016.
As a result, the loan to deposit ratio of the bank soared to 64.6pc from 60.7pc in 2015.
“This kind of performance should be applauded,” the banking expert commented.
The bank’s investment in NBE five-year bonds increased by seven percent to 4.3 billion Br in 2016.
The liquidity of the bank has improved in value terms but declined in relative terms. Its cash and bank balance increased by 7.4pc to almost three billion Br. Its liquid asset to total asset ratio declined to 16.8pc from 18.8pc.
“The decline is due to a rise in loans and advances,” according to Taye.
The bank now employs more than 3,200 people.
Source - Fortune