Dashen Bank’s latest rights offer prospectus has disclosed sizeable legal claims and off-balance-sheet exposures that could impact its liquidity position, raising concerns among investors ahead of the December 25 subscription opening.
According to the document, filed under Section 7.13 titled “Legal and Arbitration Proceedings,” the bank faces ongoing tax and civil disputes amounting to a total exposure of ETB 756 million. The majority of this relates to a guarantee extended to a roads project contractor currently under review by the Federal Tax Appeal Commission (FTAC).
Beyond these direct claims, Dashen’s contingent liabilities include ETB 77.1 billion in off-balance-sheet commitments such as guarantees, letters of credit, and undrawn credit facilities. These exposures, while standard in commercial banking, are significant in size relative to the bank’s balance sheet and could strain liquidity if any large drawdowns occur, particularly in Ethiopia’s constrained foreign exchange environment.
The bank notes that these items remain unprovisioned, citing no current expectation of crystallization. However, analysts suggest that a materialization of even a fraction of these risks could pressure Dashen’s 14 percent capital adequacy ratio and restrict dividend payouts under National Bank of Ethiopia (NBE) prudential regulations.
Dashen Bank remains one of Ethiopia’s strongest private financial institutions, reporting total assets of ETB 254 billion and a net profit of ETB 5.9 billion for the fiscal year ending June 2025. Management asserts that none of the current disputes or off-balance-sheet exposures are expected to have a “material adverse effect” on business continuity.
Still, the disclosures stand out for their specificity, contrasting earlier statements highlighting sound capitalization and profitability. Market watchers say these revelations could prompt investors to reassess short-term risk, especially as the banking sector braces for liberalization and competition from incoming foreign players.
The rights offer aims to raise ETB 6.4 billion through the issuance of 2.2 million new shares at ETB 2,900 each, which the bank says will bolster its capital base and fund digital expansion initiatives. The offer document urges potential subscribers to examine the full prospectus before making investment decisions.
According to the prospectus, the bank’s non-interest income is heavily driven by trade finance and corporate guarantees—areas where counterparty risk concentration remains elevated.
Auditors have affirmed Dashen Bank’s “going concern” status, projecting adequate working capital for at least 12 months post-rights issuance. Nonetheless, Section 7.13 of the prospectus calls for continued monitoring, given Ethiopia’s volatile macroeconomic environment and persistent foreign exchange shortages.
The rights issue precedes Dashen’s planned listing on the Ethiopian Securities Exchange (ESX) expected after February 2026. Market analysts say the additional capital is necessary but may not fully shield the bank if high-value contingent liabilities materialize amidst intensifying competition from fintech entrants and state-backed banks.
The prospectus concludes with a familiar caution: investment decisions should be based not on topline growth figures but on a holistic assessment of risks, contingent exposures, and Ethiopia’s fast-evolving banking landscape.
