Enat Bank, one of the youngest banks in the industry, saw shareholders' return on investment dip for the second year in a row, despite an improved performance last year.

But shareholders should have a bigger worry than a declined return from a net profit of almost 230 million Br from its operation in 2020/21. The figure is 10pc higher than what the Bank recorded the previous year. Shareholders' equity may have increased by 11pc to two billion Birr, in tandem with the Bank’s paid-up capital that reached 1.5 billion Br. Enat Bank, however, needs to raise 600 million Br annually in equity to meet the central bank's five billion Birr threshold capital.

Abdulmenan Mohammed, a financial statement analyst based in London, foresees difficulties for Enat directors and executives in raising the remaining 3.5 billion Br considering the economic slowdown and its lukewarm performances over the past couple of years.

"If we go by its track record, such a growth rate will be impossible to achieve," said Abdulmenan. "This may compel Enat to merge with other small banks."

Since its incorporation eight years ago with a paid-up capital of 75 million Br, Enat Bank raised equity by a yearly average of 142.5 million. Enat's directors and executives are aware of the trials that lie ahead.

Frehiwot Worku, Enat's board chairperson, urged shareholders to settle commitments and buy more shares to shore up its capital base. The air of desperation was evident during a shareholders' meeting held last month at the Inter Luxury Hotel. It is a time of economic woes due to global pandemics, wars, and growing competition within the industry for equity. For a third-generation bank like Enat, the headwind comes from almost all the private banks - large and small - running against time to meet the capital threshold set by the central bank for June 2026.

The appeal for the share-buying public comes from banks' track record in their performance, value to shareholders, and asset quality.

Close to 61pc of Enat Bank's assets, 14.6 billion, come from loans and advances. Although it is much lower than the industrial average of 74.4pc, it is a portfolio that has seen an impressive expansion of 30pc last year. For Ermias Andarge, president of the Bank, better results could have been achieved had it not been for the instability in the country's north, which forced the Bank to halt operations at eight of its 88 branches across the country.

The banking industry underwent a considerable expansion in branch networks over the past year. The 18 commercial banks opened 844 new branches, bringing the total to 7,262. The state-owned Commercial Bank of Ethiopia (CBE) leads the pack, opening 95 new branches to push its network to 1,920.

Although Enat opened 31 branches last year alone, it is one of the banks with the lowest network in the industry.

“The strategy is to position our branches in a few places and support them with electronic banking,” said Ermias.

Enat's branch expansion drive played a role in boosting deposits mobilised by 32pc to 11.2 billion Br. However, its loan-to-deposit ratio increased over three percentage points to 79.4pc; however, it is way below the industry average of 85pc, indicating the Bank has more cash in its vaults than it is lending.