Profit increased by 9.4pc
The oldest private bank in Ethiopia, formed following the reestablishment of the market economy in the early 1990s, Awash International Bank Share Company (AIB), revealed that its net profits for the last Ethiopian fiscal year 2011/12, increased by 9.4 percent, to reach an unprecedented 394.4 million birr. Tsehay Shiferaw, President of AIB, said performance in the last fiscal year was not only impressive in terms of profits, but also in terms of total income, breaking the billion birr mark and reaching more than 1.1 billion birr.
However he acknowledged that the National Bank of Ethiopia’s (NBE’s) bills purchase directives which forced commercial banks to spend 27 percent of their loan disbursements in the form of medium term bonds at low interest rates was having an effect on its overall activities, even though the bank’s performance showed steady increase in key areas.
Reportedly Awash Bank so far is the biggest buyer of treasury bills, with amounts close to 2.3 billion birr purchased at a three percent rate.
This includes the total deposits of the bank which crept to more than 9.5 billion birr, showing a 19 percent increase; loans and advances which reached more than 5.5 billion birr, a 38 percent rise; and total assets which reached more than 13.1 billion birr, a steady 18.4 percent increment from the previous 2010/11 fiscal year.
Borrowers’ numbers, increase, NPLs ratio decreases
Tsehay further said it’s not only the bank’s profit that has increased but its number of borrowers, reaching the 3,000 mark, including a significant portion located outside of Addis Ababa.
However, he said that although the bank tries its best to diversify its loan portfolio to be less dependent on collateral, the option of “clean loans” it’s following, that being loaning money with little or no tangible collateral depends on the borrowers track records, in a country where there is still an absence of information on many basic things, and a national identification system for citizens is still not been implemented.
The bank also said its non-performing loans (NPLs) ratio has reached an all time low of less than two percent, declining both in terms of percentage ratio and absolute amount, and way below NBE’s five percent threshold.
Branch numbers to break the 100 barrier, construction of buildings to intensify
Another area where AIB is pursuing a vigorous strategy is that of opening new branches in Addis Ababa, and regional cities across the four corners of Ethiopia.
In the last fiscal year alone, AIB opened up 16 branches across Ethiopia, 14 of them based in Addis Ababa, and two outside of it in Ziway area and Arsi Negelle towns. Its branches now number at 86.
In the current fiscal year, 2012/13 two branches have already been added, putting its tally at 88, with 3,000 employees, and 18 shy of the minimum 20 branches it plans to open during this period.
Tsehay said construction of buildings to be used for the bank’s branches as well as for office and other purposes rent will continue in earnest. Such construction is already progressing in Gimbi and Agaro cities as well as in Addis Ababa.
Design work is also progressing fast for a planned seven storey building in Addis Ababa’s Nifas Silk Lafto district, and a six storey building in the bustling southern city of Hawassa.
AIB had previously completed construction of its main headquarter in Addis Ababa and regional cities such as Adama, Shashemene, Nekempte and also bought buildings for its services in other regional cities like Bedesa, Jimma and Harar.
AIB orienting itself to new technologies and possibilities
Tsehay said one of AIB’s core areas of focus is reaching its customers through new technologies and innovations such as the mobile banking service it plans to strengthen during the current fiscal year.
The Bank has already embarked on the modernization of its operations, aiming at replacing the existing banking system with a new one in order to improve the quality of the service it provides and come up with new banking products.
To implement the project, AIB earlier this year selected and signed an agreement with a London based banking software supplier MISYS, international banking system worth 3.5 million dollars, covering the purchase of various banking products, in order to provide modern and efficient banking services to its customers.
In July AIB, together with two other banks Nib International Bank and United Bank who have more than 1.2 million account holders between them formed a company called Premier Switch Solution S.C. (PSS), aimed at providing shared Automated Teller Machine (ATM), Point of Sales (POS), Mobile Banking and e-Commerce services to be available on a 24/7 basis.
The company started its operations by installing 60 ATMs and 300 POS systems in major business districts in Addis Ababa. It plans to install 40 ATMs and 300 more POS every year for the coming five years.
The banks have signed a contract with S2M, a Moroccan company that won the bid to create an electronic payment system in November 2011. The system developed by S2M will allow customers of any of the three banks to use their bank credit card to withdraw money from the ATMs of any of the Premier Switch members.
It is the first time that banks have realized an integrated card payment system. The system is expected to increase the competitive edge of the banks.