Shareholders of Zemen Bank S.C expressed their satisfaction with the bank’s 5th year performance but criticized the execution by the board and administration especially concerning what they consider ‘extravagant expenses’, non performing loans (NPL), and the visibility of the bank. They also approved of the bank’s plan to open a maiden main branch in Addis Ababa and four other regional branches.
This was discussed on Zemen Bank’s 5th Regular General and 4th Extraordinary General Assembly at the African Union Headquarters’ hall held on September 22nd. Shareholders were briefed about the bank’s performance during its fifth year by both the board of directors and the external auditors, Getachew Kasaye and Friends Certified Accountants.
Berhane Ghebray (Dr.), board chairman of Zemen Bank, told more than 3,000 shareholders and their representatives that the bank’s achievement for the 2012/13 fiscal year was satisfactory with 405.1 million birr gross income. The chairman said the bank’s expenses and reserves stood at 281.3 million birr during the same period. With that, the bank’s gross profit reached 123.8 million birr. The net profit of the bank, according to Berhane, was 94.1 million birr, a 9 percent increase from the previous year. During the past fiscal year, the bank’s earning per share was 41 percent, well above the average earnings per share for all other private banks during the same period.
The chairperson stated that 70.2 million birr of the net profit is dedicated for the dividend fund, making the dividend 30.6 percent for the year. “We are able to meet our promise to make the dividend at least 30 percent and this is satisfactory,” the board chairman told the assembly.
Most of the shareholders, who were allowed to speak at the assembly by the chairman on Sunday morning, warmly appreciated the performance of the bank during the fiscal year. They also liked the bank’s proposal to open a new main branch in Addis Ababa and four branches in different regions, saying it will improve the bank’s visibility. “There are a lot of people who want to use the services of Zemen bank. However, because of the bank’s strategy -one window services- they are choosing other banks,” one speaker said. “The new branch is good news as it will contribute to spread the service nationwide and also create opportunities for employees to show noticeable growth.”
President of the Addis Ababa University Credit Association also agreed with the first speaker that the bank is doing a good job. “We are going with good news to the people we represent,” he said joyfully.
He then requested that the board and the administration clarify the situation with regards to all the rumors circulating about the bank, including the NPLs from Holland Car Plc and other companies.
Other shareholders also insisted on an explanation on the issue feeling that the board and the administration were reluctant or unwilling to adhere to methodologies that could have saved the bank from having high NPL.
The other issue that shareholders raised at the assembly was that the bank seemed extravagant with spending money in general and in terms of the salaries it offers in particular, in their views.
Tsegaye Tetemke, president of the bank, stated that the bank was able to be satisfactorily profitable, even with some of its clients being unable to pay back their loans. “Only a few of our clients that took money through clean loans [without collateral] failed to pay,” he said. “But clean loans, the product that the bank uses to reinforce exports, have played a great role in increasing the bank’s income and profitability,” he told the assembly. He told the shareholders that the administration and the board are trying to take ownership of borrowers’ assets and are waiting to conduct such efforts in a lawful manner.
One shareholder among the participants, however, shared the president’s point of view. “I don’t think it is appropriate to judge the fate of a bank based on the fate of a few companies as they are but a few of the borrowers,” he said.
Speaking about the shareholders’ comment that employees’ salaries are too high, he said that, “Employees are the most significant reason for our achievements. We want the assembly to understand that.”
The president reminded the shareholders that both clients and shareholders are receiving good services from the bank. “We are able to provide that good service because we have good employees. We need to pay good money to get and retain those good employees. It is all related,” he said. On top of that he believes the payment isn’t that high, as the bank allocates not more than 15 percent of profits for salaries.
The president further cautioned the shareholders not to be convinced of the benefits of having an exhaustive number of branches, as increasing the number of branches is too costly and the future of the banking sector is technology. “We should focus on technology,” he said. According to him, the bank currently does need some additional branches so that it has representatives in different areas, but not in terms of multiplying branches.
Meanwhile, shareholders have agreed on the proposal of the board to float additional shares worth 100 million birr in a bid to increase its capital to 450 million birr to meet the requirement of the National Bank of Ethiopia (NBE) for banks to have a capital of 500 million birr by 2016, according to Ermias Eshetu, Vice President of Marketing and Corporate Services of Zemen Bank. Ermias told Capital that the initial offering, which will last for one month starting at the end of November, is for shareholders.