Ethiopia: Addis Bank Revels in First Year Profits
Addis International Bank (AdIB) reveals a 7.81 million Br profit, after tax, in its first operational year, 2011/12.
Buna International Bank (BIB) was the first of the private banks to declare a profit, of 48,000 Br, in its first operational year, in 2009/10. Since then, no other bank has recorded profits within the first year.
The major driving forces behind AdIB's remarkable performance are decent income figures, earned from both channelling funds between lenders and borrowers indirectly, and non-interest bearing activities. There was also a considerable decrease in expenses, according to Hailu Alemu, president of the Bank, who spoke at the Bank's general assembly, held atKokebBuilding, on December 15, 2012.
AdIB has banked 12.14 million Br from interest income. It has also earned 23.48 million Br from non-interest income. Out of this amount, 17.11 million Br represents commissions and service charges.
"This incredible result was recorded because of two reasons, which are integrity-based service and cost controlling mechanisms," said Hailu.
On the other side, AdIB has incurred 4.96 million Br on interest and 19.8 million Br for staff wages and general administration. It has also maintained a provision for doubtful loans and advances, amounting to 1.57 millionBr.This represents 12.9pc of interest income.
Even if it is common to put aside a large figure for the provision of doubtful loans, in the first year of operation, this is considerably higher when compared with other banks. .
"The Bank has to be careful in its credit screening process in the years to come to keep provision for doubtful loans under five percent," recommends, Abdulmena Hamza, accounts manager at theLondonbased Portobello Group.
AdIB has disbursed loans and advances of 152.9 million Br, and mobilised deposits of 211.4 million Br. Interest paying time and saving deposits represents 74pc of the total deposits, a normal figure for a young bank.
Its loan to deposits ratio stands at 72pc, which is considerably higher than the industry average.
Buna International Bank (BIB) was the first of the private banks to declare a profit, of 48,000 Br, in its first operational year, in 2009/10. Since then, no other bank has recorded profits within the first year.
The major driving forces behind AdIB's remarkable performance are decent income figures, earned from both channelling funds between lenders and borrowers indirectly, and non-interest bearing activities. There was also a considerable decrease in expenses, according to Hailu Alemu, president of the Bank, who spoke at the Bank's general assembly, held atKokebBuilding, on December 15, 2012.
AdIB has banked 12.14 million Br from interest income. It has also earned 23.48 million Br from non-interest income. Out of this amount, 17.11 million Br represents commissions and service charges.
"This incredible result was recorded because of two reasons, which are integrity-based service and cost controlling mechanisms," said Hailu.
On the other side, AdIB has incurred 4.96 million Br on interest and 19.8 million Br for staff wages and general administration. It has also maintained a provision for doubtful loans and advances, amounting to 1.57 millionBr.This represents 12.9pc of interest income.
Even if it is common to put aside a large figure for the provision of doubtful loans, in the first year of operation, this is considerably higher when compared with other banks. .
"The Bank has to be careful in its credit screening process in the years to come to keep provision for doubtful loans under five percent," recommends, Abdulmena Hamza, accounts manager at theLondonbased Portobello Group.
AdIB has disbursed loans and advances of 152.9 million Br, and mobilised deposits of 211.4 million Br. Interest paying time and saving deposits represents 74pc of the total deposits, a normal figure for a young bank.
Its loan to deposits ratio stands at 72pc, which is considerably higher than the industry average.
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