Dashen Bank, which formed 21 years ago, announced that is its unable to reclaim loans because of a circular issued by the National Bank of Ethiopia (NBE).
The NBE circular number BSD/13/16 issued on June 17, 2016 temporarily suspended the Asset Classification and Provision Directive No. SSB/432008 sub article 7.1 (8 ) for specific borrowers of banks.
The circular that NBE issued aims to maintain the claim of coffee loan borrowers in the SNNP region affected by the drop in international coffee prices.
It stated that the borrowers in the specific region will be not be obligated to comply with the stated sub article of the 2008 directive for almost two years (until June 17, 2018).
In its report to the general assembly held on October 27, 2016 at Sheraton Addis, Dashen Bank stated that based on the NBE circular it is facing a repayment problem by coffee loan borrowers in the southern region.
The report indicated that most of the SNNP region coffee loans balances including interest of 446.6 million birr have not been repaid because the international market price shrank and the payments were rescheduled as per the circular.
In its report the external auditor of the bank A.A. Bromhead & Co Chartered Accountants commented that there was not a provision made for doubtful loans, and that the NBE circular will make a financial impact although they were not certain about the specifics. “Our opinion is that we are not qualified in respect of this matter,” the external auditor report added.
With regard to the SNNP region, the other circular of NBE issued on June 29 under the number.BSD/152016 said renegotiated non performing coffee loans may be categorized as pass, provided that the bank’s credit risk assessment shows that the loan can be fully collected in line with the new repayment program.
Despite some local and international challenges in the finance industry the bank has registered nine percent growth in aggregate income compared with the preceding year.
The report stated that the income that it secured stood at 2.7 billion birr, while a year ago the achievement was 2.5 billion birr.
From the stated amount Dashen has amassed more than 1.5 billion birr from interest income with 8 percent growth. Non-interest income sources contributed to the bank collecting 1.2 billion birr and registering 10 percent growth.
Like income the expense of the bank has significantly grown, according to the report.
It stated that in the 2015/16 fiscal year the bank’s expense soared 1.8 billion birr, which is 15 percent growth compared with the preceding year’s 1.6 billion birr.
From the expense side salary and benefits, and general expenses have grown by 18 percent and reached one billion birr.
The bank that opened 64 branches last fiscal year has been dealing with rising rental costs. The report stated that the banking operating expense climbed by 29 percent during the year. Rent expense stood 121 million birr, according to the report.
The salary and benefit expense increased 14 percent reaching 569 million birr, which is an increase of 68 million birr compared with the 2014/15 fiscal year performance.
Salary and benefit took the lion’s share in terms of expense for the bank that has over 5,600 staff.
General expenses grew 23 percent and stood at 471 million birr. The interest expense reached to 741 million birr.
Even though the bank has registered massive expansion in terms of revenue, deposit and general businesses, its profit has shown a one percent decrease compared with a year ago. In the stated period the bank has earned 951 billion birr before tax, which is a decrease of 13 million birr compared with the 2014/15 fiscal year performance.
The net profit after tax has also decreased slightly, standing at 727 million birr.
Dashen has over 28 billion birr in assets. This year that figure grew by three billion birr. Regarding loan and advances the bank has dispersed over 12.6 billion birr with a growth of over one billion birr. From the loan sector the domestic trade and services sector continued in its top position like other private banking sectors.
The loan amount dispersed for domestic trade and services stood at 4.3 billion birr which is a 73 million birr increase. However, loans allocated for agriculture shrank to 189 million birr from 223 million birr a year ago.
Loans for the manufacturing sector which ranked second in terms of loan allocation grew by 380 million birr and reached 3.2 billion birr for the year, while the transport sector received 778 million birr from Dashen Bank an increase of 290 million birr.
Dashen has 10,700 banks and over 1.4 million depositors. During the reported period Dashen Bank earned about 890 million birr from the international banking sector.
The authorized capital of the bank was 2.5 billion birr and the paid amount 1.5 billion birr.
The board disclosed the head quarters of Dashen will be finalized in the beginning of the coming year. Dashen has 220 branches throughout the country, in the current fiscal year the bank has already opened 16 new branches.