Bunna Bags Huge Profit, Dividend Remains Flat

Bunna International Bank, one of the mid-sized banks, had a positive year last year, increasing profits by over half. Yet the earnings per share (EPS) paid out in dividends has remained the same over three consecutive years.

In the reported period, the company increased profits by 51.6pc to 472.5 million Br. Despite the huge leap in profitability, its EPS remained at about 286.95 Br over the past three consecutive periods. Last year's dividend to its 13,000 shareholders showed a marginal three percent increase.

Mulugeta Alemayehu, CEO of Bunna, argues that EPS stagnated due to the Bank's decision to increase its paid-up capital.

The Bank increased its paid-up capital by 20pc to nearly 1.8 billion Br, making it one of the highest capitalised banks.

Sewale Abate (PhD), the chairperson of the board of directors of the Bank and associate dean for Research & Technology Transfer at Addis Abeba University, argues the management made the right decision to increase the number of shares to expand the capital base.

"The decision is timely to build up the Bank’s competitiveness in the long run when the finance sector soon opens up to external competition," he said.

However, Abdulmenan Mohammed, a financial statement analyst with close to two decades of experience, cautions the management to look into its capitalisation policy and said it should aim to maximise returns to its shareholders.

The Bank's profitability is due to increased performance in financial intermediation operations and other areas of business. Interest on loans, advances and investment in NBE bonds have increased by 24pc and reached 1.3 billion Br. The increase in non-interest income, such as fees and commissions, also rose by 59pc to reach 415.4 million.

Bunna also succeeded in achieving a 22pc increase in foreign exchange dealings, collecting 77.1 million Br in the last fiscal year.

“Achieving such growth in all areas of income-generating activities is impressive,”  said Abdulmenan.

Providing reduced interest lending rates to exporters, timely response to customers’ demands and flexible loan arrangements were instrumental to attracting and retaining customers who generate foreign currency, according to the CEO.

Along with income, the expenses of the company also swelled. Interest it paid on deposits increased by 12.9pc and reached 439.8 million Br. Personnel, as well as other operating expenses, have increased markedly by 34.5pc to 716.7 million Br.

Expanding by 34 branches in the last year and a salary raise designed to retain staff were the major reasons for jump in expenses, according to the CEO.

Bunna also increased its provisions for the impairment of loans and other assets by 19pc to 50.9 million Br. Its total assets have also expanded by more than 11.3pc to reach 14.5 billion Br.

"The Bank's asset growth is far lower than that of other banks that have released their financial reports recently,” Abdulmenan observed.

Bunna disbursed loans and advances of 8.2 billion Br, an increase of 19pc. It also mobilised deposits of 10.6 billion Br, an increase of 6.4pc.

The growth of deposits at Bunna is the lowest recorded in the industry over several years, according to Abdulmenan.

“This shows it must have faced serious competition," he said, "the management should come up with a strategy to reverse this."