Shabelle Bank spent the past year doing what many young banks try to do first. It tried to grow bigger and faster.

Its executives called the year one of “consolidation and transformation,” and by the numbers, the young financial institution did expand at speed. Its assets climbed above six billion Birr from 3.76 billion Br, while deposits jumped by 70.4pc to 2.28 billion Br.

Profit before tax reached 26.25 million Br, an increase from 19.93 million Br, while net profit grew by 65.6pc to 20.95 million Br. These were marginal outcomes compared to ZamZam‘s 1.23 billion Br and Hijra’s 721 million Br.

Total income hit 570.3 million Br, with only 79.8 million Br (14.0pc) coming from net markup income.

To Board Chairperson Ibrahim O. Farah, the performance showed “disciplined cost control.”

Yet the deeper story was less about size than conversion. Financial analysts observed that Shabelle Bank grew larger, but it did not grow stronger in core banking businesses. The financial institution, which began as Somali Microfinance and became a full-fledged Islamic bank in 2021, ended the 2024/25 financial year with a balance sheet that looked “capital-rich and liquidity-heavy, but weakly monetised.” It raised more money, expanded its footprint and deepened its digital presence. But its financing portfolio shrank, its earnings leaned heavily on non-core sources, and signs of asset-quality deterioration became harder to ignore.

Acting President Abduljuhad H. Muhamed argued that profit was not the Bank’s “founding goal” so much as access and scale. A graduate in accounting, Abduljuhad has over a decade of experience across banks, including senior roles at ZamZam Bank and earlier positions at Oromia Bank, Hibret, and Wegagen banks.

He characterised the years since 2021 as a period of “stabilisation and investment,” meeting the National Bank of Ethiopia's (NBE) requirements and elevating the institution to “bank-level” status.

Its paid-up capital was 1.2 billion Br, leaving a wide gap to the five billion Birr minimum threshold the NBE has set for 2026. Abduljuhad disclosed that the Somali Regional State, which holds a majority stake, has decided to gradually reduce its share, although no fixed target has been announced.

"The old principle that the government should keep '50pc plus one' share is loosening," he told Fortune. “The Regional Cabinet has the appetite and readiness to open up to 40pc of the Bank’s equity to foreign capital.”

Share sales reached 878.4 million Br, equal to 88pc of the annual target. The Bank moved beyond its home base into Dire Dawa, Harar, and the Oromia Regional State. It shifted its headquarters to Addis Abeba, buying a nine-story building near Wollo Sefer after failing to secure land from the city administration.

Digital channels became central to this expansion, though. The Bank’s customer base reached about 1.7 million, served through 65 branches, with an annual transaction value of 41.2 billion Br.

While the Bank mobilised 941.2 million Br in additional deposits in the last financial year, its loans and advances actually fell by about eight percent to 1.73 billion Br. While Shabelle Bank was growing, it was not using its funds to generate income from financing, unlike ZamZam Bank, which grew its customer financing by 38.8pc to 6.42 billion Br. This lack of lending intensity left Shabelle’s earnings profile looking very shallow, with core markup income accounting for only 14pc of total income. Most of its revenue came from “other operating income,” which made up over 70pc of the total.

Return on assets (RoA) was 0.34pc, while return on equity (RoE) was 0.95pc, signalling limited efficiency in generating returns on equity and assets, according to Aminu Nuru, a financial analyst based in Doha, Qatar.

Fee and commission income contributed 89.1 million Br (15.6pc). Other operating income dominated at 399.9 million Br (70.1pc). With a weighted benchmark of 50.57pc for net interest income as a share of total income, Shabelle Bank’s 14pc revealed a bank driven far more by non-core earnings than by lending and financing activities.

Across the banking system, commercial bank assets expanded in 2024/25 by 44.5pc to 4.74 trillion Br, deposits surged by 40.7pc to 3.51 trillion Br, and net income after tax increased to 93.4 billion Br. Shabelle outpaced the system in asset and deposit growth but fell far short in profitability, lending intensity, and earnings quality.

Aminu was more cautious, noting that while total assets surged and cost controls kept expenses below projections, trade and other receivables nearly tripled from 688 million Br to 2.186 billion Br, accounting for about 36pc of total assets. The notes to the financial statements, he argued, do not explain this line well enough, raising questions about whether it represents fully visible claims, related-party exposures, unreconciled balances or assets moved off the loan book.

"Profitability has improved in headline terms, but core banking income has weakened," he said. “Non-core income is driving profitability, while core banking income continues to weaken.”

Total operating expense stood at 544.1 million Br, with personnel expenses taking 54.9pc of total expense. Other operating expenses added 171.7 million Br (31.6pc). Together, these two lines accounted for 86.5pc of the expense base, resulting in a net profit margin on total income of about 3.67pc. Asset turnover was roughly 9.45pc, and the asset-to-equity ratio was only 2.67 times, revealing weak margins and inefficient use of assets.

Abduljuhad conceded that the Bank once held “too much cash” idle on the balance sheet, disclosing that excess liquidity is now being directed into Sharia-compliant investments.