Berhan Bank’s most recent financial year marked a decisive turn for mid-sized private banks. The Bank’s performance over the 2024/25 financial year was one of strategic expansion, diversified income streams, and robust capital discipline that drove an impressive leap in profitability, all while avoiding the excesses that could derail such ambitions.
The most striking result was a 66pc profit growth, a robust figure but one that still lagged the fourfold surge seen at Addis International Bank. However, unlike banks whose improvements derived from a single event or windfall, Berhan Bank’s gains were spread across income categories and supported by lower credit costs.
The Bank’s gross profit grew to 2.51 billion Br from 1.51 billion Br in the previous year. Net profit jumped 76pc, and earnings per share climbed by 56.1pc to 546.97 Br. Berhan Bank’s Chairperson, Eligo Legesse, described the year as both “successful and transformative,” stating that the managment delivered consistent growth, a stronger balance sheet, and increased shareholder value through improved profitability and efficiency.
Incorporated in 2009 with 97 million Br in paid-up capital raised from 12,000 shareholders, Berhan Bank has charted a steady course of expansion. Paid-up capital rose by 24.3pc to 4.29 billion Br, reaching five billion Birr within three months of the reporting period. Among its shareholders, Yohannes Hailu found the year’s results especially strong compared to previous periods.
However, he argued that the results could not be credited solely to the macroeconomic environment and cautioned that continued effort will be needed in what remains a difficult economy.
Much of the transformation was attributed to changes in the Bank’s governance following the appointment of the current President, Ermias Tefera, in January 2024.
His background was Vice President for Operations at Berhan Bank, Chief Inspector at Awash Bank, and Head of Credit at the state-owned Commercial Bank of Ethiopia (CBE), where his banking career began before a period at Enat Bank and as a private consultant. Ermias returned at a crucial time after his predecessor, Girum Tsegaye, resigned following disputes with the board amid slow growth.
The Bank has since revised its risk appetite statements and intensified monitoring, with Eligo voicing optimism about sustaining growth and strengthening financial positions in the coming year.
The surge in profitability was powered by non-interest income. Total assets expanded by 28pc to 58.96 billion Br, mainly driven by over 20pc growth in deposits. Cash and bank balances jumped by 51.2pc to 7.32 billion Br, pushing liquidity up to 12.4pc of total assets.
On the key measure of returns, Berhan Bank found itself ahead of most of its peers. The Bank’s return on assets (RoA) stood at 3.55pc, outpacing Lion International Bank’s 2.3pc and exceeding the private banking industry’s average. The only outlier, Addis Bank, posted a return on assets exceeding 40pc, though that figure was due to foreign exchange circumstances unlikely to be repeated. According to analysts, Berhan Bank’s performance was less an anomaly than a product of deliberate, disciplined management within a challenging operating context.
Profitability at the operating level was unusually high, with gross profit accounting for about a quarter of total income. Asset turnover was less than 20pc, a respectable figure for a Bank whose portfolio was oriented toward traditional lending instead of fee-based business. The Bank’s leverage, with an equity multiplier of nearly seven times, was neither aggressive nor unduly conservative by local industry standards.
These three elements combined to produce an implied net return on equity of about 28pc, a figure that, while attractive, was rooted in sound banking practice rather than financial engineering.
Crucial to this outcome was the composition of income. Net interest income amounted to 3.95 billion Br, representing 38pc of total income, placing Berhan Bank closer to Zemen Bank than to Lion Bank, where two-thirds of revenue came from interest margins. The shift signalled a maturing business model, one less dependent on sheer balance-sheet growth.
Fees, commissions, and other operating income grew sharply, softening the impact of margin compression and credit-cycle volatility. Fees and commission income rose by 176.5pc to 2.09 billion Br, making up a substantial share of after-tax profit, while other operating income dipped by 18.6pc to 192.79 million Br. By contrast, Addis Bank’s stellar profitability leaned on an unusually low reliance on interest income, raising questions about how sustainable those returns would be once the unusual circumstances on the forex front vanished from the books.
On the balance sheet, Berhan Bank’s posture was more balanced than bold. Loans and advances totalling 34.53 billion Br accounted for under 59pc of total assets, less than Lion Bank’s 67pc but comfortably above Addis Bank’s more liquid position. The loan-to-deposit ratio fell slightly from 78.1pc to 77.2pc, considered healthy by prevailing industry standards, exhibiting that the Bank was using its funds efficiently while still maintaining a prudent buffer. In an industry prone to liquidity shocks, such a position provided valuable flexibility, enabling Berhan Bank to expand lending when opportunities arose without jeopardising stability.
Growth dynamics underlined a strategy of controlled expansion. Asset growth of 28pc exceeded Lion Bank but lagged the rapid 53pc posted by Addis Bank. Loan growth matched Lion Bank at 18pc, while deposit growth of 21pc helped keep leverage stable. Deposits ended the year at 44.74 billion Br, up 20.6pc. Notably, 62pc of deposits were in savings accounts, ensuring a stable funding base. According to Ermias, contingency funding plans and standby facilities would help manage liquidity pressures if they surfaced.
With an asset-to-equity ratio under seven times, Berhan Bank tracked the industry average. It was neither undercapitalised nor excessively cautious, running a balance sheet that delivered meaningful returns without straying into regulatory danger zones.
The Bank’s total capital expanded to 8.54 billion Br, lifting the capital-to-asset ratio to 14.5pc, slightly below the industry average of 16pc and well behind Addis Bank’s 24pc, yet more robust than Lion Bank’s 12pc. Capital adequacy was 16pc, comfortably double the regulatory minimum, though down a notch from 17pc the year before. Risk-weighted assets topped 44 billion Br.
“Capital buffers were built on strong core equity but would need to be reinforced through retained earnings, potential capital injections, and risk-weighted asset management,” said Ermias.
Asset quality supported the view that the Bank’s profits were not only a product of a good year. Impairment allowances amounted to 2.5pc of gross loans, while the annual impairment charge dropped sharply. Compared to Lion Bank’s provisioning ratio of more than seven percent, Berhan Bank’s credit cost profile appeared benign.
At year-end, impaired loans totalled about 1.62 billion Br, backed by collateral valued at 2.4 billion Br, mainly assessed internally. According to Ermias, conservative collateral valuation and restrained lending meant asset recoveries historically covered all loan values. The Non-performing loans (NPL) ratio edged down from 4.98pc to 4.78pc, remaining beneath the Central Bank’s ceiling. The managment attributed most NPLs to legacy exposures, with few new defaults, reflecting stable credit quality during loan growth and volatile macro conditions.
The Bank recorded income of 7.24 million Br from the reversal of prior impairment provisions. Abdulmenan praised the avoidance of new impairment losses. The Board Chairman credited the management and staff for balancing immediate results with longer-term sustainability, positioning the Bank for continued competitiveness.
While the economy remains cyclical, particularly in construction, trade, and manufacturing, Berhan Bank’s management has maintained tight underwriting standards. Loans and advances expanded 18.3pc to 34.53 billion Br, a pace considered reasonable given the Central Bank’s cap on lending growth. Most lending was focused on construction, domestic trade, services, and manufacturing. Some analysts raised concerns about sector concentration, especially amid political and policy uncertainty.
According to Ermias, the construction sector’s share of GDP justified such exposure, and the Bank’s portfolio is becoming more diversified.
“Most concentrated exposures are in Addis Abeba and major cities, allowing closer monitoring, while internal stress tests back up portfolio resilience,” he said.
Productivity metrics highlighted Berhan Bank’s relative efficiency. Net profit per employee was about 362,000 Br, twice Lion Bank’s level, though still only half that of Addis Bank. During the year, 18 underperforming branches were consolidated with nearby outlets while 11 new branches were opened, mostly in rural areas. The Bank’s network reached 376 branches by year-end.
At the branch level, Ashenafi Belay, who manages the Bole branch, noted that targets were exceeded. He described the Bank as “on the right track,” with profits holding up well in the new fiscal year.
However, branch expansion coincided with a notable rise in expenses.
Total expenses reached 7.8 billion Br, up by 59.9pc, with personnel and administrative costs accounting for more than 73pc. Salaries and employee benefits grew by 15.9pc to 2.41 billion Br, while other operating costs climbed 16.4pc to one billion Birr. General expenses more than tripled, outstripping growth in staff costs, while interest expenses increased by 17.2pc to 2.11 billion Br. While profit growth outpaced expenses overall, the underlying mix showed that cost discipline was emerging as a possible constraint.
Compared to Addis Bank, where two-thirds of costs were tied to staff and administration, Berhan Bank appeared burdened by higher general expenses. According to Abdulmenan Mohammed (PhD), a financial expert based in London, Berhan Bank’s cost structure should introduce some caution.
Ermias attributed foreign-exchange losses to a sharp depreciation of the Birr, which increased the cost of international payments and services.
“Headline expense growth didn’t imply inefficiency,” he told Fortune. “Much of the spending was on lasting efficiency gains and sustainable expansion.”
Deposits per branch, averaging about 118 million Br, were comparable to Lion Bank, indicating that consolidation has yet to deliver a decisive boost to branch productivity. Operational improvements were evident, but the Bank was not yet redefining efficiency within its peer group.
Nonetheless, Berhan Bank has navigated the past year with a strategic coherence that sets it apart from many mid-tier rivals. By diversifying its income, holding firm on credit standards, and leveraging capital judiciously, it has produced attractive, sustainable returns.
The Bank’s President attributed the results to a shift toward fee-driven digital revenues, a structural move to diversify income sources and reduce dependence on interest income. The Bank rolled out several digital initiatives, such as the CBS-24 core banking upgrade, Kacha FinTech for micro digital lending, and a fuel aggregator system. According to Ermias, these services are managed under strong controls and integrated with the Bank’s risk framework.
Analysts see Berhan Bank as an emerging outperformer, not a runaway winner. Its high returns were defensible, its growth was measured, and its balance sheet sat between the assertiveness of Lion Bank and the caution of Addis Bank. The main vulnerability lies in administrative costs, which have risen at a rate that is difficult to justify if revenue growth slows. In a less favourable economy, such costs could pressure margins.
For much of the past decade, the private banking industry has been distinguished mainly by branch growth and balance-sheet size, heavily influenced by regulatory constraints. The past year’s performance for Berhan Bank unveiled a shift toward competition focused on earnings mix, cost control, and capital management as much as raw scale.
The Bank’s investments in bonds and treasury bills jumped by 76.4pc to 6.35 billion Br. According to Ermias, such investments cushion the Bank against credit risks and provide a buffer during periods of default, even as policy volatility remains a systemic concern. Plans were in place to rebalance this allocation as securities mature.
The macroeconomic backdrop makes these strategies especially relevant. Ongoing inflation, hard-currency shortages, and uneven growth across sectors have continued to test asset quality across the industry. Banks that depend heavily on interest income and rapid loan growth remained vulnerable to policy changes and credit shocks such as the foreign exchange regime change in August 2024.
Berhan Bank’s increasing reliance on non-interest income provides a buffer against such uncertainty. Moderate leverage means adverse surprises are less likely to be magnified through the equity base. Compared to its peers, Berhan Bank exited the 2024/25 financial year with momentum and credibility. While not the most profitable or fastest-growing financial institution, it occupies a position many competitors would covet. In an industry often marked by extremes, Berhan Bank’s ability to deliver strong, old-school banking returns may prove to be its greatest asset.
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