Oromia International Bank has increased its profit after tax by 44pc to 221.8 million Br, boosting its earnings per share from the previous year’s 310 to 364 Br.

The 10th private bank to be formed in Ethiopia, OIB has been recording profits since it first started operations in 2008. Interest income has grown by 60pc to a little over half a billion Br, propelling total profits forward to 850 million in the fiscal year that ended in June 2015.

A bigger rise in expenses has accompanied the growth in income. Expenses have amounted to 555.5 million Br, up 63pc. The majority of those funds was directed towards branch expansion and associated fees.

Speaking from Dessie, while at the opening of the Bank’s 169th branch on December 12, 2015, OIB President, Abie Sano told  Fortune that opening branches has made a massive contribution to the Bank’s reach, and ultimately, amount of deposits. Forty-five branches were opened in the fiscal year, and deposits increased from five to eight billion Birr.

Loan to deposits ratio of OIB jumped to 62pc from last year’s 51pc.

“This is a great improvement. The current level of loan-to-deposit ratio is ideal in the banking industry,” said Abdulmenan Mohammed, accounts manager for the Portobello Group Ltd., a London based holding company with subsidiaries in property investments and development projects.

Assets have also climbed to an all time high driven by loans and advances that amount to almost five billion Birr, an increase of 87pc from the previous year.

This has affected the Bank’s liquidity levels. Cash and bank balances have decreased by 10pc to 1.7 billion Br. Liquid assets to total assets ratio has declined to 17.56pc from 30.3pc and the ratio of liquid assets to total liabilities has dropped by 43pc.

“OIB should take care of not hitting the legal minimum [15pc] for Liquid assets to total assets ratio, as it is close to it,” added Abdulmenan.

But demand for credit was high, during the fiscal year, the Bank counterd.

“We wanted to use our resources efficiently,” Abie explained.

Not sitting on the resources at hand has enabled the Bank to increase the role played by loans in total assets from 40pc to 50pc.

Interest Free Banking-Financing (IFBF), the first of its kind to be launched by a private bank in Ethiopia, has also performed well. It has recorded a 19-fold increase in its second year of operation and registered a quarter of a billion Birr in assets.

Dubbed Murahabah, OIB offers IFBF by procuring various items and machinery on the clients’ behalf, and offers the procured materials at long-term payment schemes.

Other non-conventional services, like mobile and Internet banking, which the bank acquired for 5.5 million Br three months before the end of the last fiscal year, did not have an effect on the year’s performance.

“They are still in the pilot stages,” Abie confirmed, adding that the bank is waiting for a go ahead from the central bank. He said he expected both, as well as a card banking system to be operational by the fourth quarter of the current fiscal year.

The paid up capital of OIB has increased by 26pc to 678.7 million Br. This brought the Bank’s total capital, including share premium, legal reserve and retained earnings, to seven million Birr shy of a billion Birr.

“It was already in our plans to reach three billion Birr within five year’s time,” the President said, referring to the General Assembly held in November 2014.

This brings its capital adequacy ratio (CAR) to 17pc.

“Even though OIB has a capital adequacy ratio of twice the legal minimum, its CAR is less than most banks,” cautioned Abdulmenan.

The bank’s investments have also increased from 54.4 million Br to 61.8 million Br, with shares in several companies including Oromia Insurance, Elemtu Integrated Dairy Industry, OIB-ODA Real Estate, Ethio-Switch, Tsehay Industry, Gutu Oromia Business S.C. and Elemo Kiltu House Building. Its plans to construct is headquarters in the financial district, an area around Addis’s Biherawi-Mexico area that have become the area of choice for bank-owned skyscrapers, has been put on holds Their request for a larger plot has yet to come to fruition.

Source : AddisFortune