Nib International Bank S.C. (NIB) has registered a 313.7 million Br profit after tax, reversing the mere 33,000 Br profit registered last year. Last year's dismal figures were attributed to enormous capitalisation.
Its latest profits are up by 11pc from the 286.3 million Br registered in 2011-2012. This is in addition to a 20pc increase of paid up capital, to 1.2 billion Br on last year's performance, and a 67.5pc growth on 2012's performance.
However, NIB's earnings-per-share (EPS) has decreased progressively, from 190 Br to 143 Br over the past four years.
"Even though there are benefits of increasing paid up capital, its impact on earnings, as well as dividends per share, should not be ignored. NIB should seriously review its capitalisation policy and use existing capital efficiently," said Abdulmena Mohammed Hamza, accounts manager for the Portobello Group Ltd, a London based holding company. "If there is a need for increasing capital, it should be in line with profit growth."
In contrast, the bank's officials saw its capitalisation as a positive development."We decided to boost our capital base irrespective of the decline in EPS, as a long term strategy, to ensure the durability, as well as the financial capability of the bank," said Mulugeta Dilnesaw, the bank's corporate planning and business development director.
According to Mulugeta, there are two reasons the bank is focusing on capitalisation: the recommendation for banks to have a strong capital base following the 2008 global financial crisis, and the 27pc of total loans invested into national bank bonds.
The bank, which was established in May 1999 by 717 shareholders, now has more than 3,500 shareholders. They are unhappy about the declining EPS, according to one shareholder who attended the annual shareholders' meeting on November 1, 2014, at Millennium Hall.
"It is good to see the bank showing progress from last year's net profit, but I feel it can do better, it is not enough. This was the mood shared by shareholders," he said.
Bank officials admitted that it was kept busy by internal problems and unable to significantly boost net profit after tax, the shareholder said.
However, NIB has performed well in financial intermediation operations, as well as in other areas of business. The interest earned on loans, advances, deposits, treasury bills and National Bank of Ethiopia(NBE) bonds has gone up by 21.66pc to 694.09 million Br. Non-interest incomes, such as service charges and commissions, gains on foreign exchange dealings and other income, have also increased by 22.85pc to 344.81 million Br.
"Despite the constant decline in gain on foreign exchange dealings being reversed, it is still lower than what it was five years ago," added Abdulmena.
Gain on foreign exchange dealings in 2010 was 130 million Br, whereas, in 2013 and 2014 it was registered as 65 million Br and 73 million Br, respectively. The total deposits mobilised by NIB have increased by 19pc to 7.9 billion Br, with the loan-to-deposit ratio increasing from 66.56pc to 68pc.
NIB has been very successful in increasing the loan-to-deposit ratio over the past four successive years. Deposits with foreign banks declined 77pc from 357.4 million Br to 82.2 million Br year-on-year.
If decline continues at this level, NIB may face difficulties in maintaining its liquidity, as well as earning more income from foreign exchange dealings, predicted Abdullemana. He recommended that NIB should scale up its deposit mobilisation efforts and look for long term funding sources. It also needs to consider putting a brake on increasing its loan-to-deposits ratio, he stated.
The bank showed such strong decline due to the shortage of foreign currency in Ethiopia and falling export revenues from gold and coffee, says Mulugeta.
The bank has made other advances, opening 20 new branches to increase its total branches nationwide to 91.
The total assets of NIB have reached 10.747 billion Br. NIB disbursed loans and advances currently stand at 5.4 billion Br, showing an increase of 22pc. It has invested 2.686 billion Br in NBE's five year bond at three per cent. The investment in NBE bonds accounts to 25pc of the total assets and 34pc of the deposits of the bank.
Source: AllAfrica
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