Berhan International Bank S.C. (BIB) saw its total assets increase by 71pc to 2.197 billion Br in 2012/13.The Bank, which also managed to perform well in its financial intermediation operations, has doubled loans and advances to 964 million Br and mobilised deposits of 1.593 billion Br.This came despite the fact that the Bank operated in a tight environment, marred by shortage of foreign currency, which negatively affected its operations. This has pushed the cost of doing business up to much higher levels.

The steep rise in competition for resources has also been among the main challenges faced by the Bank to maintain success in the fiscal year that ended on June 30, 2013.“The Central Bank’s order to all private banks to maintain loan portfolios that are comprised of at least 40pc short-term loans has become a big challenge,” Daniel Gebremedhin, director of Planning & Business Development Division with the Bank, told Fortune.

Berhan has invested 348.85 million Br into NBE five-year bonds. This represents 15.88pc of the total assets and 21.9pc of the total deposits of the Bank.At a time when deposit mobilisation sources are drying up for most of the private banks operating in the country, Berhan’s total deposit as of June 30, 2013, reached 1.6 billion Br. This is an increase of 661.4 million Br or 70.9pc compared to last year’s figure of 931.7 million Br. Berhan has managed to improve its loan to deposits ratio to 60.5pc from 53pc.

This achievement came against the prevailing competitive environment facing the sector.

“It shows the growing confidence of the public in our bank,” Daniel said.
Berhan, which held its annual assembly on Saturday, November 9, replicated this success in its profit, registering a growth of 55.21pc to 52.29 million Br. Growth in both interest and non-interest income helped the Bank to achieve this profit.

“Interest income and foreign commissions contributed greatly to reap greater profits,” Daniel said.

The Bank, nevertheless, incurred costs while increasing its income, with expenses in staff and general administration increasing considerably.Interest expense has increased by 38.81pc to 39.2 million Br and staff and general administration expenses have soared by 70.58pc to 58.97 million Birr.Further expansion in staff and general administration expenses is inevitable as Berhan is a newcomer to the industry, said Abdulmena Mohamed, who is an accounts manager for the Portobello Group Ltd – a London-based holding company with subsidiaries in property investment and development.

“The management of the Bank should maintain the income growth in line with the expansion in expenses,” said Abdulmena.Where the Bank differed from several others in the industry is in its liquid assets, which have registered high growth. Berhan’s cash and bank balances have gone up by 37.47pc to 739.87 million Birr. The liquid assets to total assets ratio has declined to 33.67pc from 41.88pc and liquid assets to deposits ratio has dropped to 46.44pc from 57.76pc.

Despite this decline in the various liquidity measures compared to last year, the ratios are significantly higher than other private banks.“This should give Berhan ample opportunity to expand its loan book in the coming years,” Abdulmena said.Daniel agreed with Abdulmena, indicating that the loan expansion of the Bank has improved in the year that ended on June 30, 2013.

During the previous year, Berhan managed to open seven additional branches in Addis Abeba and other towns, pushing the total number of branches up to 22. Four sub-branches have also been opened during the year, increasing the number of sub-branches to five.

“We plan to open 20 new branches this year,” Daniel said.

Having achieved a capital adequacy ratio (CAR) of 35.25, Berhan is well-capitalised. It has increased its paid-up capital by 58.77pc to 313 million Birr.Berhan needs to increase its capital by 17pc annually, in order to meet the NBE directive that compels private banks to increase their paid-up capital to half a billion Birr by 2016, recommended Abdulmena.

“We can comfortably meet the NBE’s requirement by 2016,” Daniel said.

However, the increase in paid-up capital last year, according to Abdulmena, is far higher than required. It has considerably undermined EPS and return on equity, which dropped slightly to 15.39pc from 16pc.

“The management of should increase capital gradually to reduce its impact on shareholders returns,” Abdulmena advises.



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