Global Bank (Ethiopia) ended its 2023/24 fiscal year by treading a narrow line between robust expansion and caution. It displayed a balance of deposit, asset, and lending growth while wrestling with mounting operational costs and heightened provisioning to guard against credit risk in a volatile economic environment. The Bank, formerly Debub Global Bank, also responded to regulatory demands, moving forward with an ambitious rebranding effort.

Private lenders expanded in the broader banking industry, where the state-owned Commercial Bank of Ethiopia (CBE) continues to dominate, posting a 48pc rise in assets and similar growth in deposits. Their total assets grew by 28pc and deposits by nearly 30pc to 18.2 billion Br. But Global Bank found itself somewhere in the middle, achieving a 28pc rise in total assets, matching the private sector average, yet it stood out by boosting profit before tax by 48pc.

The Bank’s net profit margin rose to 25pc from 23.13pc the previous year; about a quarter of each Birr earned goes straight to its bottom line. Management seems to have balanced higher operational costs against revenue gains, though an added note of caution comes from the Bank’s provision expenses, which surged 226pc, a potential marker of future concerns given the unpredictable economic backdrop.

However, senior executives proudly touted loans and advances, jumping to 15 billion Br, up by 15pc over the previous year. International trade accounted for 37.3pc of the total loan and advance portfolio, while domestic trade services captured 35pc. Construction followed with 9.6pc.

Yet, such progression is punctuated by reminders of inherent risk. The loan-to-deposit ratio declined from 95.88pc to 86.23pc, showing improved liquidity management but remaining above the industry mean of 60.2pc. Analysts note the National Bank of Ethiopia’s (NBE) view that ratios north of 85pc leave lenders vulnerable to liquidity shocks. Global Bank’s President, Tesfaye Boru (PhD), countered that the Bank has pulled back from the more difficult territory.

“A one percent jump from the recommended level is not that concerning when we have come a long way from previous years,” he told Fortune. “Liquidity is in a good position now. It’s visible in the trends.”

Over two billion Birr in loans were extended in the last fiscal year, an achievement that executives attributed to a customer-centric approach in retail and corporate banking. The Bank’s overall deposit base was reinforced by a 54pc jump in foreign currency mobilisation, reaching 98.7 million dollars. Total revenue expanded by 37pc, supported by net operating income that climbed from 1.8 billion Br to 2.4 billion Br, a 28.5pc improvement.

Return on Assets (ROA) was 2.01pc, while Return on Equity (ROE) was 13.62pc, demonstrating some measure of efficiency despite industry-wide profitability headwinds.

Yet, the Bank’s profit after tax retreated by 10pc to 499 million Br, an outcome that drew the attention of analysts who cite a 39pc uptick in expenses. The cost base soared to 3.08 billion Br, with interest payments consuming 53pc, wages and benefits 26pc, and other general expenses 21pc. Part of these higher operational costs was deployed to branch expansion — 73 new branches in one year — and a corresponding jump in staff headcount to accommodate the growth. The number of newly hired staff rose 39pc.

Tesfaye disclosed that the Bank recruited seven security personnel, among other staffers, for each branch, driving up personnel expenses. He is looking to cut costs by integrating technology into more operations.

“We're exploring ways to substitute some duties with tech-driven solutions,” he said.

Tesfaye, who holds a doctorate in business leadership from the University of South Africa, said most senior management will be PhD holders in the coming years, a move he believes will enhance Global Bank’s competitive edge. After graduating from Addis Abeba University in economics, management, and business administration, Tesfaye began his career at Hibret Bank as a loan officer, eventually serving in various capacities at Abyssinia and Zemen banks. When he joined Global Bank as vice president, he took the helm in 2019 and ushered in a rebranding from Debub Global Bank to Global Bank (Ethiopia.)

He now should prove that Global Bank’s expansion strategy can deliver sustainable returns. Shareholders will watch whether the Bank can hold onto a 25pc net profit margin or if elevated operating costs weigh more heavily on future earnings. The growth spurt in staff numbers is intended to support branch expansion and customer service, but those costs quickly eat into profits unless revenue per employee keeps pace.

The rebranding initiative, including a name change and a visual overhaul, is designed to appeal to a broader customer base, including the diaspora. While it has arguably enhanced brand recognition, some market watchers wonder if it will be enough to stand out in an increasingly crowded marketplace.

The Bank’s growing network now includes four dedicated branches for Interest-Free Banking (IFB), which collectively mobilised 281 million Br in deposits. These operations remain small but meaningful, especially as there is considerable interest in the market for Sharia-compliant banking services. Analysts point out that the Bank’s financials do not break out specific IFB performance measures, making it hard to gauge its exact influence on the bottom line.

“We’re just starting,” Tesfaye said.

The Bank considers human capital investment essential to facing competition from an anticipated influx of foreign banks.

“Investing in our people is the best way to compete in today’s globalised banking environment,” he said. “Most of our senior management will hold PhDs in the coming years.”

For the finance analyst Aminu Nuru, who is based in Doha, the hiring spree weighed on the Bank's profit.

“Operational costs, including opening new branches and depreciation of right-of-use assets, do not come cheap,” he told Fortune.

But, the President stated that deferred tax adjustments accounted for much of the decline.

“It’s due to tax, not operation,” he said, noting that profit before tax hit 757 million Br, which is considered a more accurate indicator of the Bank’s underlying performance. “It’s the true indicator of our performance,” Tesfaye said. “It’s better if we take that.”

Complications emerged in how earnings per share (EPS) were calculated. The Bank reported a 14pc increase in EPS to 332 Br, even though net profit fell, after using profit before tax for the computation instead of net profit.

“It’s the same as the net profit case,” Tesfaye said in his team's defence. “There is no other justification. Last year’s tax has distortions.”